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Why I’d buy this tempting growth share right now

Digital publisher and media company Future (LSE: FUTR) has been turning its business around, but I think the turnaround is maturing to become a fast-growth proposition. Brisk expansion into the digital media space is driving revenue and profit growth that is more than offsetting any weakness in the legacy paper magazine division. The company is making strong inroads into the market in the US, which is a geography with a lot of ongoing potential.

Strong financial and operational progress

Looking back, Future hit its operational nadir during 2015 with revenue, profits and operating cash flow at a low point. Since then, figures for those financial indicators have been building back up, driven by both organic growth and a string of acquisitions, many helping the firm push into new, often digital, areas of business.

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The market likes today’s full-year results report, and the share price looks perky. The figures are good. Overall revenue increased 48% year-on-year with 11% of that growth being organic, which suggests the firm’s offering is appealing to its customers. The fast-growing Media division is active in e-commerce, events and digital advertising and saw revenue rise 88%, of which 40% was organic progress. But even the Magazine division increased its revenue by 20%, although that was because of an acquisition.

Adjusted earnings per share moved 33% higher than the year before and the directors restarted dividend payments at 0.5p per share, which I think is a good signal that the turnaround is robust. Around 58% of gross profit came from the exciting Media division during the year and the remaining 42% from Magazines. Meanwhile, the Media division is pushing hard into the US market. Revenue grew 109% in North America and 28% of that was organic. I think the ongoing potential for the company to expand across the pond is one of the key attractions of the stock, although UK revenue moved 38% higher too, and 6% of that advance was organic.

A big market opportunity in America

UK revenue accounted for 70% of the total and US revenue 30%, but if the company keeps growing at or near the rate it has been in America, we could see the geography becoming rapidly more significant to the firm’s overall trading results. Future’s chief executive, Zillah Byng-Thorne, was upbeat in the report and said the financial results are due to the firm’s strategy of “leveraging” its specialist media platform and diversifying its revenue streams “both geographically and across its product offering.” The company completed four acquisitions in the period, which “materially” increased the firm’s global footprint. And  Byng-Thorne said the progress of the US business presents “material opportunities to monetise our significant US online audience.” 

Current trading is ahead of the directors’ expectations, which is a phrase that investors love to hear because it suggests further outperformance to come. Indeed, the outlook is positive and the management team is “confident” that trading for the current year will “continue the trends of the last year with strong growth.”  I think Future is emerging as a robust growth proposition with a great deal of potential surrounding its so-far-successful expansion into the US. I’d be happy to buy some of the firm’s shares right now.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.