All are enjoying the attention, with their shares jumping even though the FTSE 100 index is down. The Avast (LSE: AVST) and HomeServe (LSE: HSV) share prices are up around 4%, continuing strong recent runs. They still look tempting buys to me.

Momentum on their side

Avast calls itself “the world’s leading consumer cybersecurity company,” with 20 offices worldwide, including in London and Silicon Valley. The Czech-based company floated in London two years ago at 246p. Its share price has since doubled, trading at 525p today.

Keeping people safe online is big business as the fraud threat is, unfortunately, forever. Avast’s 2016 acquisition of rival AVG turned the FTSE 100 newbie into a cybersecurity giant. It serves consumers and small businesses, and is best known for its Avast antivirus software. 

The Avast share price has momentum on its side, bouncing back sharply from the March crash. It now trades 60% higher than just three months ago.

This FTSE 100 tech play looks an attractive growth and income stock, given current momentum and the size of the market it’s pitching at. It isn’t even that expensive, trading at 19 times earnings. You also get a dividend, with the stock yielding a decent 2.3%.

The £5.4bn FTSE 100 group has almost 13m paying customers. It’s expanding into network and smart home security, and plans to grow further through targeted M&A.

Avast boasts high barriers to entry and strong competitive moats, while its subscription-based business model offers high cash and revenue visibility. The coronavirus pandemic should have little impact, as people are more dependent on their screens than ever, while fraudsters are more active.

As more established FTSE 100 names struggle, I would suggest turning your attention to the new and fast-growing kid on the block.

I’d buy this FTSE 100 stock too

Home emergency repairs company HomeServe is another FTSE 100 new entry that’s looking to accelerate growth. Its share price has also jumped 60% in just three months. Over five years, it’s up an impressive 200%. The home emergency cover specialist has also weathered the coronavirus in decent shape, as it was declared an essential service. Staff worked on throughout. No firings, no furloughs.

International expansion should drive future growth and revenue prospects. The FTSE 100 new entry already has more than 8m customers in the US, more than half of its total, and is targeting Japan next.

It’s growing fast, with sales up 10% in the year to 31 March while underlying profits rose 12% to £181m.

The £4.3bn FTSE 100 group currently yields around 2%. The one sticking point is that it is expensive, trading at around 30 times earnings. That shows just how well the HomeServe share price has done, and how highly investors rate its prospects.

You won’t find many better growth stocks on the FTSE 100 than these two right now.

The post I’d buy these 2 FTSE 100 growth stocks that have soared since the stock market crash appeared first on The Motley Fool UK.

More reading

• Starting with nothing? Here’s why now is the perfect time to start building a passive income
• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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.

The following two saw their share prices climb more than two thirds last year, and they could have further to go this year.

Polypipe Group

Polypipe Group (LSE: PLP), which delivers sustainable water and climate management solutions for the built environment, returned almost 70% to shareholders in 2019, despite what it called tough trading conditions.

Its most recent update, from October, talked up a “resilient performance” in tough markets, but group revenue, nonetheless, rose 4.3% to £381.7m, with operating margins up 30 basis points, boosted by “margin accretive acquisitions and strong cost controls.”

This was before the general election, during a time when Brexit uncertainty squeezed domestic firms like this one, so it will be interesting to see if it benefits from any Boris bounce. The £1.1bn group has several factors in its favour, which it identifies as the “structural housing shortage, historically low interest rates, real wage growth, and near full employment.” 

If you’re bullish on the UK economy, this could be a good way to play its recovery. Despite its strong share price growth, the Polypipe share price isn’t too expensive, trading at 17.4 times future earnings.  

Growth forecasts also look positive, with 8% expected this year, and 7% in 2021. You get a forecast yield of 2.5%, although this is primarily a growth stock, and one that may repay further digging.

Avast

Cyber-security specialist Avast (LSE: AVST) also flew in 2019, as it continues to benefit from operating in a rapidly growing area, with the market forecast to be worth $170bn a year by 2022.

Unfortunately, the £4.6bn group hit a stumbling block in January, when it was forced to close down 2013 acquisition Jumpshot, which had been caught scraping browsing data from the company’s customers without full permission, and selling it to advertisers including Google, Yelp and Microsoft.

The hugely embarrassing revelation, exposed by Motherboard and PCMag, knocked the Avast share price down 25%, although it has picked up 16% in the last week. Given that Jumpshot harvested millions of dollars from clients, future revenues could take a hit, although management said Jumpshot produced just $36m of full-year adjusted 2019 revenue, against $862.8m for the group.

The closure should therefore have little impact on its full-year 2019 results, which are line with expectations. Customer trust may prove harder to rebuild, although given the minimal long-term impact that the big data scandal had on Facebook and others, investors may not be too worried.

Avast is a top-five antivirus provider with more than 400m customers worldwide, and expects full-year organic billings to be up 10.2% to $900.7m.

Analyst Peel Hunt recently said its stock may be overvalued, given that it now faces threats from Windows Defender, and the move towards cloud-based services. Avast still has massive potential, but it can’t afford further slip-ups.

The post £2K to invest? I’d check out these 2 high-flying FTSE 250 growth stocks appeared first on The Motley Fool UK.

More reading

• Starting with nothing? Here’s why now is the perfect time to start building a passive income
• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Polypipe. 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.

Unique business

Dechra is a relatively unique business. It is one of the world’s largest producers of veterinary medicines, a highly specialist but booming market. Over the past six years, the company’s sales have grown at a compound annual rate of 20%, while earnings per share have surged from just 18p in 2014 to an estimated 98p for 2020. The dividend to shareholders has more than doubled over the past six years. 

I think this trend is going to continue. People are willing to spend more and more on their pets, and they’re not willing to accept just any old pharmaceutical products. Vets and consumers want the highest quality products.

What’s more, Dechra’s products are protected by patents, and it is spending £25m every year in research and development to stay ahead of its competitors (R&D has increased in line with sales over the past five years). 

City analysts are expecting earnings growth of 64% in 2020 and 12% for 2021. The stock currently supports a dividend yield of 1.3%.

Explosive growth

JD Sports Fashion (LSE: JD) is another investment I think could help you build a million-pound pension pot. In my opinion, this is one of the best-run businesses on the market.

Sales have increased at a compound annual rate of 31% over the past five years and, during the past 10 years, the stock price has risen from around 10p to 746p at the time of writing, a compound annual return of 54%. 

JD Sports has been particularly successful in attracting young, wealthier consumers, and it’s just starting to expand in the United States. Last year, it bought the Finish Line shoe store chain for £400m in this market and the benefits are already starting to show through.

Net profit is expected to expand at a double-digit rate for the next two years and, considering the company’s growth track record, I reckon it’s highly likely growth won’t stop there. JD Sports seems to have cracked the code when it comes to sports/casualwear retailing. I reckon the firm can repeat the success it has had over the last decade in the next. 

Growing market

My last retirement millionaire-maker is the internet security business Avast (LSE: AVST). According to various sources, the size of the global internet security market is expected to hit around $250bn by the middle of the next decade. Avast is well-positioned to grab a significant share of this market as one of the primary providers of antivirus software for the personal and small business market.

This growth suggests that even if Avast doesn’t grow its market share, sales have the potential to expand at an annual rate of 10-11% for the foreseeable future. Because the company’s operating profit margins are nearly 40%, this growth should drop straight to the bottom line.

The stock might look expensive as it’s currently trading at a forward P/E of 17.8, although considering the market available to the company and the projected growth in demand for internet security software over the next five years, I think this is a price worth paying. 

The post £6k to invest? These three growth champions are my top buys for 2020! appeared first on The Motley Fool UK.

More reading

• A P/E ratio of less than 7. Is this a red-hot value share to consider now?
• Is this the biggest bargain in the FTSE 100 right now?
• If we get a stock market crash next week, I’m ready!
• Just look at these tasty FTSE 100 bargains!
• Forget the FTSE 100 and come back after summer? Here’s my plan!

Rupert Hargreaves owns no share 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.

Booming market

The company is a leader in cybersecurity, a market that’s seeing explosive growth. Analysts estimate worldwide spending on cybersecurity products was around $100bn in 2017 and is forecast to hit $170bn per annum by 2022. 

Avast is trying to grab a small share of this market. Revenue was just $251m in 2015 and is expected to hit $869m for 2019. Analysts are expecting further growth in 2019. They’ve pencilled in revenues of $926m for 2020. 

Staying ahead of cybercriminals is essential if Avast wants to maintain its reputation. That’s why the company is spending more than $70m a year on research and development to do just that.

However, this spending is only a fraction of the group’s overall income. Last year, the firm reported an operating profit margin of nearly 40%. Therefore, most of Avast’s revenue growth goes straight to the bottom line. 

As sales expand, the City is forecasting earnings growth of 16% for 2019 and nearly 10% for 2020. These forecasts put the stock on a 2020 P/E of 13.8, which undervalues the business, in my opinion. Indeed, shares in London-listed peer Sophos are currently dealing at a forward P/E of 29.9, more than double Avast’s current valuation. 

That’s why I think Avast could double your money. Not only is the stock trading at a substantial valuation discount to peers, but it also looks as if earnings have the potential to continue to grow at a double-digit annual rate for many years to come. 

Booming profits

If Avast is not for you, then you might want to take a look at financial services group Investec (LSE: INVP). Over the past five years, shares in Investec have fallen by around 20% excluding dividends. But despite this performance, the company’s underlying business is much stronger today than it has ever been.

The share price might have declined 20% since 2014, but net income is up 60% over the same period. Meanwhile, Investec’s dividend to shareholders has been hiked at an average rate of 5.2% per annum since 2013. 

Usually, when a company’s share price declines in the face of rising profits, it’s a sign the business is issuing a lot of new shares, diluting existing shareholders, and pushing the price down. However, in this case, that’s not happening. Earnings per share have increased by 60% since 2014. 

I think this presents a fantastic opportunity for investors. After recent declines, shares in Investec are dealing at a forward P/E of 8, below the sector median of 13.

On top of the above, the stock supports a dividend yield of 5.8%. A return to the sector median multiple could imply a gain for shareholders of 63% combined with two years of dividend income, and you could be looking at a total return of nearly 100%.

In other words, Investec could be an excellent buy for value-seeking investors. 

The post £2,000 to invest? I think these FTSE 250 stocks could double your money appeared first on The Motley Fool UK.

More reading

• With an 8% dividend yield and P/E below 7, is this the best value and income play on the FTSE 250?
• 3 growth shares for an ISA that have beaten the FTSE 100 for the past 5 years

Rupert Hargreaves owns no share 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.

As a leading global cybersecurity provider, Avast is one of the first companies customers turn to when they require advice and software to stop cybercriminals, which in my opinion, makes this one of the best stocks investors can buy today to profit from the market’s growth.

Cash flow champion 

According to the group’s first quarter trading update, revenues increased by 6.1% in the first quarter of 2019. Excluding the impact of discontinued business and the sale of its Managed Workplace division, Avast’s revenue increased 8.5% year-on-year for the quarter. City analysts are expecting the firm to report revenue growth of around 6.2% for the full year, and it looks as if the company is on track to hit this target after those first-quarter numbers.

Revenue growth isn’t the only reason why I think Avast can double your money. This company is also exceptionally profitable. According to its first-quarter trading update, adjusted EBITDA increased 5.4% to $117.5m, resulting in an Adjusted EBITDA margin of 55.5%.

At the moment, most of the cash flow generated by the business is being used to reduce debt. At the end of March, the company had a net debt-to-EBITDA ratio of 2.3 and it paid off $200m of debt during the first quarter taking the total amount paid off in the past two years to approximately $700m, according to my calculations.

Despite the company’s steady growth and healthy cash generation, shares in Avast are trading at just 12.3 times forward earnings, compared to the UK tech sector average of 19.5. This looks too cheap to pass up and implies the shares should be dealing around 60% higher than they are today. Add in the stock’s 3.5% dividend yield, and potential for high single-digit earnings growth for many years to come, and I don’t think it is unreasonable to say that this investment could double your money over the next three to five years.

Special dividends 

As well as Avast, I reckon Micro Focus (LSE: MCRO) is an undervalued UK tech champion. City analysts are expecting this company to report earnings per share growth of around 32% for 2019, an impressive turnaround for the business which reported almost no growth between 2013 and 2017.

After growing 32% this year, analysts have pencilled in growth of 8.8% in 2020, leaving the stock trading at a 2020 P/E of 10.4. As mentioned above, this multiple is significantly below the UK tech sector average of 19.5.

What’s more, this is one of the most attractive income stocks in the FTSE 100. Shares in the company support a dividend yield of 4.4% at present and it has a history of returning cash to investors via special dividends and share buybacks.

Between 2011 and 2017 Micro Focus handed back close to 600p per share of cash to shareholders via special and ordinary dividends and it’s planning a further $1.8bn cash return during the next few months following the sale of its SUSE business to Swedish buyout group EQT Partners for $2.5bn.

Once again, with these return on offer, I do not think it’s unreasonable to say it’s possible Micro Focus could double investors’ money over the next two years.

The post £2k to invest? I think these two UK tech champions could double your money appeared first on The Motley Fool UK.

More reading

• Starting with nothing? Here’s why now is the perfect time to start building a passive income
• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

The Motley Fool UK has recommended Micro Focus. 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.

Uphill struggle

It is easy to see why investors were disappointed with the results. The market views IQE as a growth stock, (its forward P/E of 20.5 stands testament to that) but the firm’s numbers for 2018 do not support this thesis.

Revenues for the period only increased by 1.1%, and a 14.2% decline in gross margins meant earnings before interest tax depreciation and amortisation (EBITDA) declined 28.9% year-on-year and profit before tax slumped 43%.

Looking at these numbers, I think the company has its work cut out to return to growth, although at the time of writing, City analysts are forecasting earnings per share of 4.8p for 2020, compared to just 1.4p for 2018. They are also expecting revenues to grow by around a third over the next two years.

Only time will tell if the company can hit these targets, but considering last year’s performance, I’m not willing to bet on it. Also, a forward P/E of 20.5 does not leave much room for manoeuvre if the group misses City growth targets once again.

Looking at this evaluation, I think further disappointments could lead to a significant drop in the share price.

Monster growth

I’m more optimistic on the outlook for cybersecurity expert Avast (LSE: AVST). For a start, shares in this business, which has been a public entity for less than 12 months, are currently dealing at a relatively attractive forward P/E of 13.2, that’s compared to a multiple of around 19 times earnings for the rest of the software services industry. Also, investors buying today can pocket a 3.2% dividend yield.

But it is the company’s future potential that I am really excited about here. Cybersecurity is a booming market, and it is only going to continue to grow as the world becomes more digitised.

Booming market

As I recently noted, experts suggest that the cybersecurity market is expected to double in size between 2018 and 2024. This implies double-digit growth for the industry every year until the mid-2020s. I see no reason why Avast’s earnings cannot grow at least in line with the rest of the market, and even if the company does not manage to match the market growth rate, I reckon there is still a strong chance that this business can grow earnings in the high single-digits for the foreseeable future.

Using a rough, back of the envelope calculation, I calculate that if the company’s earnings per share grow at an annual rate of 10% between now and 2024, Avast will earn 34.6p per share in 2024, putting it on a forward (2024) P/E of 8.6 at the time of writing.

If the stock attracts a valuation similar to the rest of the software services sector, the shares could be worth as much as 657p in five years, more than double the current price and that is excluding dividends. I think these figures clearly show Avast is a better growth stock than the IQE share price.

The post One monster growth stock I’d buy before the IQE share price appeared first on The Motley Fool UK.

More reading

• Starting with nothing? Here’s why now is the perfect time to start building a passive income
• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Rupert Hargreaves owns no share 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.

What this means is that the real value of your cash savings is probably falling, not rising.

I’d always recommend saving at least three months’ income in cash before investing in the stock market. But over the long term, I believe that equity investment offers a much more reliable way of building retirement wealth.

This could be a long-term success

FTSE 250 cybersecurity firm Avast (LSE: AVST) is a name that may be familiar to you from the anti-virus software on your PC. This business is bigger than you might realise, with more than 435m users globally in over 59 countries.

Avast only floated on the London stock market in May this year. So the firm doesn’t have a very long track record with UK investors. However, its financial performance so far seems promising.

During the first nine months of 2018, the group’s adjusted revenue rose by 4.7% to $613.1m. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for this period rose by 8.8% to $335.6m, giving an adjusted EBITDA margin of 54.7%.

A potential cash machine

Adjusted profit figures like this are all very well, but they don’t always reflect a company’s cash generation or debt obligations.

My colleague Ian Pierce covered Avast’s half-year figures earlier this year. These showed free cash flow after interest payments of $123m, versus a reported operating profit of $109.7m.

Although the firm’s net debt of 2.8x EBITDA is above my preferred maximum of 2x, Avast’s strong cash generation gives me confidence that it should be able to reduce borrowing levels quite quickly.

With the shares trading on 13 times forecast earnings, I believe this stock could be worth considering as a long-term growth opportunity.

Woodford dumped this stock… I wouldn’t

FTSE 250 IT infrastructure group Softcat (LSE: SCT) sells IT equipment and services, building infrastructure such as networks, data centres and security solutions for customers.

The stock was previously held by top UK fund manager Neil Woodford, but as my colleague Ed Sheldon explained, Woodford sold his shares earlier this year. I’m not going to guess at his reasons for selling, but I can say that this isn’t a share I would have chosen to sell myself.

Highly profitable

Yesterday’s full-year results showed that Softcat’s revenue rose by 30% to £1,082m last year, while operating profit climbed 36% to £68m. According to the firm, 97.7% of operating profit was converted to cash — an impressive figure.

Although yesterday’s results only indicate an operating margin of 6.3%, this firm’s lack of costly factories and other major assets means it generated a return on capital employed of 67% last year. That’s exceptionally high.

Softcat’s share price has fallen by 22% from its August high of 888p, to just 690p at the time of writing. This has left the shares trading on 24 times 2019 forecast earnings, with a 2.5% dividend yield.

That’s still a little pricey for me, given that earnings growth is expected to slow to around 5% this year. But if the shares fall below 600p — lifting the dividend yield to about 3% — I would start to get seriously interested.

The post Forget the cash ISA! These FTSE 250 dividend growth stocks could help you retire early appeared first on The Motley Fool UK.

More reading

• Looking for last minute ISA buys? Here are 2 on my radar
• Down 23%, consider this FTSE 250 share that’s boosted profit forecasts!
• Softcat: a FTSE 250 tech stock offering growth, dividends and value

Roland Head 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.

A small-cap diamond in the rough

Instead, with decades to go before my own retirement needs, I’d look towards companies with high growth potential like software provider Microgen (LSE: MCGN). The company sells two types of software, one that is used by wealth managers for back-office functions and the other that is used by finance departments for a variety of functions.

The company’s growth is being driven by Microgen branching out into serving new industries, designing new programmes to deepen its relationship with customers, and a general increase in regulatory requirements that leads businesses to pay for specialised software from industry experts rather than doing things in-house.

The company’s half-year results released this morning show the positive effects of these changes as revenue for the period jumped 23% on a reported basis to £34.9m with organic growth of 11%. Adjusted operating profits rose at a slower clip by 12% to £7.4m. But as the company moves towards generating more of its revenue from high-margin recurring sales, there’s plenty of potential for greater profit growth.

Microgen’s shares aren’t cheap at 21 times forward earnings, but with high growth potential, an attractive business model and cash on hand, I reckon this isn’t a ridiculous price to pay.

An exciting new IPO 

Another software provider that I believe has long-term potential is newly-public Avast (LSE: AVST). The company may well be familiar to readers as it’s the largest provider of consumer-facing anti-virus software.

While most of its 435m users only use the free barebones anti-virus software, plenty of consumers and small businesses pay for its product. Over just the past three years, the group’s revenue has ballooned from $251m to $652m thanks to organic growth and acquisitions. Investors will also like that recurring revenue made up 88% of group sales in 2017, allowing management to comfortably pour considerable sums into marketing and R&D budgets that should support long-term growth.

As the importance of cybersecurity awareness rises among consumers and businesses, the group has a clear growth trajectory, albeit with plenty of competitors. However, its market leadership should be a huge competitive advantage over the long term through high consumer brand awareness and substantial financial firepower.

I like Avast’s long-term potential, but as a relatively new IPO I’m also happy to let the company report a few quarters of results before diving in and buying shares. But with considerable growth prospects, a high degree of insider ownership and proven ability to turn a profit, it’s definitely higher on my watchlist than the FTSE 100.

The post Two stocks I’d buy for my retirement accounts instead of the FTSE 100 appeared first on The Motley Fool UK.

More reading

• Starting with nothing? Here’s why now is the perfect time to start building a passive income
• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Ian Pierce 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.