Marks and Spencer

Marks and Spencer (LSE: MKS) is a major British multinational retailer that sells clothing and beauty, home, and food products. This week, three director dealings were carried out. A large number of shares were received in lieu of a cash dividend, but a portion was sold to cover tax and national insurance obligations.

• Name: Stuart Machin
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 203,120 @ nil
• Total value: N/A

• Name: Stuart Machin
• Position of director: Chief Executive Officer
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 99,121 @ £1.37
• Total value: £135,805.68

• Name: Sacha Berendji
• Position of director: Property, Store Development, and IT Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 138,115 @ nil
• Total value: N/A

• Name: Sacha Berendji
• Position of director: Property, Store Development, and IT Director
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 67,399 @ £1.37
• Total value: £92,343.37

• Name: Paul Friston
• Position of director: International Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 131,691 @ nil
• Total value: N/A

• Name: Paul Friston
• Position of director: International Director
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 62,264 @ £1.37
• Total value: £88,048.11

Cranswick

Cranswick (LSE: CWK) is a leading UK food producer and supplier of fresh and premium food products. It’s most famous for its meat products. Four directors opted to exercise their share options this week. However, they then proceeded to sell portions.

• Name: Mark Bottomley
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 31,800 @ nil
• Total value: N/A

• Name: Mark Bottomley
• Position of director: Chief Financial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 16,379 @ £30.82
• Total value: £504,768.02

• Name: Adam Couch
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 48,100 @ nil
• Total value: N/A

• Name: Adam Couch
• Position of director: Chief Executive Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 24,775 @ £30.82
• Total value: £763,515.95

• Name: Jim Brisby
• Position of director: Chief Commercial Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 31,800 @ nil
• Total value: N/A

• Name: Jim Brisby
• Position of director: Chief Commercial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 16,379 @ £30.82
• Total value: £504,768.02

• Name: Chris Aldersley
• Position of director: Chief Operating Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 26,300 @ nil
• Total value: N/A

• Name: Chris Aldersley
• Position of director: Chief Operating Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 13,546 @ £30.82
• Total value: £417,460.628

HomeServe

HomeServe (LSE: HSV) offers low-cost home warranty and home repair options. It markets itself as the solution to expensive and inconvenient emergency home repairs. Three massive director dealings happened earlier in the week, as shares were awarded to these directors based on performance conditions.

• Name: David Bower
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 21,119 @ nil
• Total value: N/A

• Name: David Bower
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 10,190 @ £11.69
• Total value: £119,121.10

• Name: Tom Rusin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 30,619 @ nil
• Total value: N/A

• Name: Tom Rusin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 11,815 @ £11.69
• Total value: £138,117.35

• Name: Richard Harpin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 34,911 @ nil
• Total value: N/A

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, all the director dealings above occurred with free shares. These shares were acquired by directors under their companies’ share plans. These were either a restricted share plan (Marks and Spencer), or incentive plans (Cranswick and HomeServe).

Share award schemes give employees actual shares rather than share options. The value of shares given to directors here is treated as employment income. This means that it may be subject to tax and national insurance contributions. That is unless the directors opt for an HMRC-approved share scheme, which has its own rules and requirements. Incentive plans give directors shares when they hit certain performance targets. For HomeServe directors, the awards were subject to the company’s earnings per share.

The post Director dealings: Marks and Spencer, Cranswick, HomeServe appeared first on The Motley Fool UK.

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John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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 company will provide ‘soft services’ including catering, retail and leisure at 233 military establishments in the North of England, Scotland and Northern Ireland over the next five years. Contract wins are the lifeblood of services firms but the total revenue potential of these deals pale in comparison to the £845m provision for underperforming contracts, the £700m net debt pile and the £805m pension deficit that currently dog this one’s financial performance. 

To discount these wins as irrelevant would perhaps be a little hasty however, as I believe they could help build the momentum Carillion needs to survive.

A Bearish Bounty

Carillion is the most shorted stock on the exchange and has been for a year and a half. The shares have already fallen 75% this year but, according to the FT, 16 funds are still shorting it today. The bear case rested on the company’s revenue recognition policy. 

Revenues are calculated through a process of estimates and can, therefore, differ heavily from cashflows over the course of a five-year contract. Many costs can fluctuate in such a time period, including labour, machine rental, raw materials and more.

Delays are a cost of doing business too, but are hard to quantify ahead of time. For example, the company’s Public Private Partnership deals, originally considered safe sources of cashflow, have encountered significant amounts of asbestos at great cost. 

Depending on how aggressive forecasts are, this can lead to sudden profit warnings as we’ve seen at Carillion. On top of that, it is hard to form a competitive advantage, aside from scale, in the services industry. Margins are often paper thin and it often doesn’t take much to shunt a company from a profit to a loss.

Contract critical

That said, recent business wins at Carillion are promising. Because these contracts can drag on for years, customers are acutely aware of their service provider’s finances. You wouldn’t want the firm going bankrupt halfway through a contract now, would you? 

Carillion’s balance sheet is weak. Most tangible assets are receivables that – if certain press articles are to be believed – may not be received in full. However, a £500m fundraising should be enough to see it fighting fit again, but that’s a huge ask given the £260m market cap.

Potential customers might avoid it due to its financial frailty. In turn, investors may be unwilling to provide the necessary injection of capital given the poor business outlook. The recent contract wins help reverse this vicious cycle and in doing so increase the chance of a favourable fundraiser. 

But in its current state, I still consider Carillion unworthy of an investment. Even if it wasn’t mired in uncertainty I’d be put off by the industry itself. Contracts often go to the lowest bidder and it seems inevitable that working on long-term, low-margin contracts will go wrong for all but the most experienced of management teams. 

The post Carillion plc’s contract wins could be worth much more than £300m appeared first on The Motley Fool UK.

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Zach Coffell has no position in any 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.

Interserve

Support services and construction group Interserve (LSE: IRV) is going through a rough patch, as its troubled Glasgow ‘energy from waste’ project continues to drag on the company’s financial performance. It’s a problem that just seems to be getting worse.

On Monday, the company raised its provision for exiting the ill-fated waste business to £160m, up from the previously guided figure of £70m. The big hike was down to higher than expected litigation costs relating to the now terminated Glasgow contract and the decreased likelihood of potential recoveries from its subcontractor, Energos, which recently entered administration.

The company is shifting its focus towards winning more support services work because of the increased pricing pressures in the construction business and recent supply chain failures. But exiting from the business won’t be a magic fix, as Interserve faces a series of headwinds, ranging from rising cost inflation to cuts in discretionary spending and Brexit-related uncertainty.

Moreover, Interserve’s balance sheet is expected to come under pressure due to the cash outflow from its energy from waste business — net debt is expected to rise to around £350m by the end of 2017. This could affect the sustainability of its dividends, and potentially force the company to raise capital.

With shares currently yielding 10.9%, Interserve’s shares seem to me like a potential dividend trap. However, Interserve’s underlying earnings is expected to only fall modestly this year, with City analysts forecasting a decline of only 8%. That leaves the stock trading at an extremely low multiple of 5.3 times its expected underlying earnings in 2017, and implies its dividends are covered by more than 2.8 times underlying earnings.

Capita

Interserve is not the only company in the sector reporting difficult trading conditions, as Capita (LSE: CPI) has issued multiple profit warnings over the past year.

The outsourcing outfit is finding it difficult to win new contracts as businesses have delayed making key investment decisions due to the uncertainty caused by the Brexit vote of last June. In addition, as a result of one-off costs incurred on a Transport for London congestion charging contract, Capita lowered its pre-tax profit expectations for 2016 by up to £100m, to at least £515m, before the impact of the latest £40m write-down to accrued income relating to legacy assets.

But despite these issues, I have more confidence that Capita will be able to maintain its dividends at current levels. That’s because although the company will no doubt take big hit to earnings, the impact on cash flow is much more muted. Also, the longer-term prospects for the company remain attractive as the underlying business is underpinned by a series of cyclical and structural growth factors.

Capita’s shares have been under pressure over the past few years, and now trade on a tempting forward P/E of just 8.9. On top of this, the shares offer a chunky 5.7% dividend yield, with underlying dividend cover expected to remain above 2.0 times.

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Jack Tang has a position in Capita plc. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Stock market collapse?

You will, of course, want to check on your portfolio which, if you bought wisely will be cheery enough to take the edge off the coming days and weeks when friends and relatives tell you the self-styled man-of-the-people and billionaire, won with fewer votes than Mrs Clinton, all hail democracy. You’ll be shown highlights of a colourful election campaign, featuring divisive rhetoric, interesting views on women, foreigners, and so on and so forth, and you’ll hear commentators predicting everything from a stock market collapse to Armageddon.

You may also see Trump supporters waving banners about reclaiming their country, although I’m sure Native Americans may have their own view on that. But before you completely lose your faith in humanity, and sell your shares in a blind panic, let me ask you a question. When was the last time a politician fulfilled all his/her election promises?

Invest in what you know

These are uncertain times and the more uncertain they get, then the more reliable defensives like  Reckitt Benckiser (LSE: RB) and Bunzl (LSE: BNZL) look very appealing. So how uncertain is it really? Well, already at the weekend the President-elect seemed to perform a U-turn on a giant campaign promise, to repeal ObamaCare, and instead will tinker with the Affordable Care Act that is hated by Republicans. I’m sure there will be further election U-turns and back again down the road.

If you’re worried about trade agreements, interest rates, the oil price, the value of the pound, and how they might impact on your portfolio, then I would suggest you sit tight, and invest in what you know, especially if what you know has strong defensive qualities. If interest rates rise, will people stop buying Nurofen or Gaviscon? If we have to negotiate new trade agreements will people stop buying Cillit Bang or Dettol? If the value of sterling sinks further, will orders for food packaging and hygiene products take a dive? I think not.

Buy and forget

Reckitt Benckiser  and Bunzl do all of these things between them. They’re two companies that most people have never heard of, and yet provide the products I’ve listed above plus many more well-known brands of consumables to a rapidly expanding worldwide market. Both Reckitt and Bunzl are low-risk defensive stocks providing everyday essentials to consumers who will buy them over and over again no matter what the political or economic landscape.

In fact, both firms have been expanding their global operations steadily over many years, and all the while rewarding their shareholders with rising dividend payouts, and indeed a rising share price. If you’re looking for buy-and-forget investments to park your hard-earned cash, then look no further than these two boring builders of wealth. I predict your portfolio will come up Trumps.

The post How to make your portfolio Trump-proof appeared first on The Motley Fool UK.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

No Turkish Delight

At the end of September, the FTSE 250 company completed another financial year with management far more upbeat regarding the outlook. The travel firm continues to experience good demand for its holidays in the UK and Northern Europe, but this has been offset by weaker demand in Germany, particularly to Turkish destinations due to security concerns. The numbers confirm the healthy demand and Turkey-related problems as the group’s bookings, excluding Turkey, were up 8% year-on-year, but down 4% with Turkey added back in. Personally I don’t see this as a problem. Memories are short, and as time goes on I expect demand to return to previous levels, as long as no other terrorist or political upheavals happen.

I think Thomas Cook is on the road to recovery, and the City seems to agree. Consensus forecasts suggest that revenues should start to pick up, rising from £7.8bn to £8bn for the year just ended, with a further increase to £8.2bn for the current year to September 2017. Analysts are also expecting the travel firm to treble its pre-tax profits for the year to £155m. After a 40% share price slump this year, Thomas Cook looks good value at just seven times earnings for fiscal 2017. Contrarians might be tempted to take a dip ahead of those full-year results on 23 November.

Power up your portfolio

Another mid-cap firm finding it tough going over the last few years is temporary power provider Aggreko (LSE: AGK). The Glasgow-based firm has seen its share price drift lower in recent years, sliding from all-time highs above £24 in 2012 to recent levels below £8, with the lower oil price continuing to impact a number of its key markets. Although revenues have remained steady over the same period, pre-tax profits have declined from £367m to just £226m reported for 2015.

First-half results were disappointing, with the power firm reporting a 31% drop in pre-tax profits to £61m on revenues of £685m, 12% lower than H1 2015. However, the Rental Solutions business is seasonal and normally weighted to the second half of the year, with the Industrial Power Solutions arm also expected to pick up in the latter part of the year as it starts to see the benefits of work won in Eurasia and the Middle East.

Nevertheless, the City doesn’t expect a return to growth until 2017 when revenues are forecast to be much healthier at £1.7bn, with a 12% boost to underlying earnings. At current levels this would leave Aggreko trading on a very attractive price-to-earnings ratio of 11.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In its most recent trading update the firm revealed that total revenue had risen 10% to £26.4m during the first quarter, compared to the same period the year before, with like-for-like revenue up 8% to £26m. There was also an improvement in average like-for-like achieved rent, up from £25.31 to £25.99 per sq ft. By the end of the first quarter, Big Yellow had 3.55m sq ft occupied, 7% higher than a year earlier, equal to 78% of the maximum lettable area. In my view these are excellent results, whichever way you choose to measure them.

More appealing valuation

Big Yellow Group has pioneered the development of the latest generation of self-storage facilities, making full use of state-of-the-art technology. Its storage facilities tend to be located in high profile and highly accessible main road locations, with the brand name now possibly the most recognised in the UK self-storage industry. The company has been operating as a Real Estate Investment Trust (REIT) since 2007 and shareholder payouts have been rising steadily every year since 2010, with further growth anticipated.

The company’s premium valuation may have put off some value-focused investors in the past. But after their recent slump the shares certainly look more appealing, with the earnings multiple falling to 18 and dividend yield rising to a healthy 4.5% for the year to March 2018. In my view, Big Yellow looks like a buy for income seekers after a progressive dividend as well as long-term investors seeking capital growth.

Turnaround in fortunes

It’s certainly been a tough few years for the world’s largest security company G4S (LSE: GFS), with the firm dropping out of the FTSE 100 index as well as being embroiled in a number of widely-publicised controversies, including the London Olympics and more recently its involvement with prisons in Israel. In 2014, Archbishop Despond Tutu along with others, penned an open letter to G4S, calling for it to end its work in Israeli prisons that detain children. Finally, after much international pressure, the firm revoked its contract with Israel. 

It looks like 2016 will be the year G4S finally turns things around. Indeed, after four years of decline, earnings are starting to rise, and last week the firm announced that it had won new contracts with annual revenues of £1bn and total contract value of £2bn since the start of the year. In spite of all its problems, G4S has been a very reliable payer of dividends, with payouts improving every year for the last 12 years. I think that if dividends can continue to grow in times of trouble, they can certainly continue to grow when things improve. Income seekers with a passion for rising dividends should certainly take a closer look at G4S, currently yielding 4%.

The post 2 ‘secret’ dividend shares you can’t afford to miss appeared first on The Motley Fool UK.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Personally I think it’s a bit of both. Yes, many investors in the FTSE 100 group will have wanted to bank their paper profits, but I also think that many believed the pace of growth was unsustainable and the shares were starting to look expensive based on a slower growth outlook. They were right. Underlying profits for the year to April rose just 8%, compared to 46% the previous year and 71% in FY2014. But after losing a third of their value since this time last year, are the shares now in bargain territory, or should investors remain cautious?

No Brexit impact

In its latest update management confirmed that there had been no detectable impact of the Brexit vote on consumer behaviour in the UK, and in fact first quarter like-for-like revenue in the UK & Ireland was up 4% despite being negatively affected by refurbishment disruption. Total group revenue was up 9% for the first three months of its financial year, with like-for-like revenue in Southern Europe up by an impressive 13%, driven by strong growth in Greece.

There was further encouraging news with the company announcing that a new e-commerce platform for Carphone Warehouse had gone live in the UK & Ireland, and the group’s 3-in-1 programme which aims to bring the Currys, PC World and Carphone Warehouse brands under one roof was well on track.

In addition, the company is now able to deliver the entire Dixons Carphone small product range to customers across 500 Carphone Warehouse stores, making it one of the largest click-and-collect operations in the UK. With further growth in prospect, I believe Dixons Carphone is a rare blue chip bargain trading at below 11 times earnings for fiscal 2017.

Recovery play

Builder’s merchant and home improvement retailer Travis Perkins (LSE: TPK) has also seen the value of its stock fall heavily this year with its shares now trading close to three-year lows. This year’s slump leaves the company’s shares trading on an enticing valuation at just 11 times forward earnings. But is this genuine value for bargain hunters, or is there further pain to come?

In its most recent update, the Northampton-based group announced the closure of 30 branches in its trade businesses, as well as 10 smaller distribution and fabrication centres, as a result of uncertainty in consumer demand for 2017. The closures will be part of a cost-cutting programme that includes the write-off of some IT legacy equipment.

Personally, I think these efficiency programmes will help to optimise the group’s network in the long run. And although uncertainties surrounding Brexit will continue for some time, the UK is still facing a housing shortage, and new construction and planning permission should continue to benefit from government policy. At current levels I see Travis Perkins as a long-term recovery play in the building and construction sector.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Perhaps. But in my opinion it won’t be too long before savvy investors scoop up the shares and send them back heading north. Why? Because for me what makes the business such an attractive investment is the fact that the majority of its products are used to treat medical conditions for which there’s no other effective solution. Or they have a clinical or dosing advantage over competitors’ products. That should be music to the ears of potential investors.

Cats and dogs

In its most recent statement, management confirmed that its first quarter performance was in line with expectations and that all its recent acquisitions were performing well. That includes its most recent £31.3m purchase of Sydney-based Apex Laboratories, which sells branded animal products in Australia and New Zealand. Apex will provide Dechra with access to the Australian pet market, which has around 4.2m dogs and 3.3m cats and includes a new manufacturing facility and a development pipeline.

I can’t see any let-up in Dechra’s growth, as animal welfare is taken more seriously worldwide, and the group continues to launch new products and expand its geographical reach. Dechra continues to outperform in the majority of therapeutic areas and markets in which it trades, especially in the US. For me Dechra continues to be a good long-term buy given its growth potential, but with a premium price-to-earnings ratio of 25 for FY2017, I would suggest investors wait for the next big retracement before buying.

Recurring income

Another mid-cap firm that’s been outperforming this year is specialised technical products group Diploma (LSE: DPLM), its share price also recording new highs last month. The group, which provides technical products and services to the life sciences, seals and controls industries, focuses on supplying essential products and services that are funded by the customers’ operating budgets rather than their capital budgets, providing recurring income and stable revenue growth.

Over the last five years Diploma has grown its underlying earnings at an average rate of 15% per year through a combination of acquisitions and organic growth. Management expects revenues for the year just ended 30 September to increase by 14% with acquisitions contributing 8%, and currency effects adding 4% to revenues thanks to the weakness in sterling. In my opinion Diploma is another excellent long-term pick for growth investors, but with a lofty P/E rating of 22, I would sit tight and buy on weakness to gain better value.

The post Could these top-performing stocks be about to collapse? appeared first on The Motley Fool UK.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The Dublin-based group did however reveal a 110% increase in product sales year-on-year to $3.32bn, but this figure falls to $1.77bn without the inclusion of Baxalta products. The group’ s new dry-eye treatment XIIDRA, which was launched in August, contributed $14m to Shire’s Ophthalmology franchise with 64,732 scripts written through to 21 October having gained a 16% market share.

Attention growth investors

Shire has long been a favourite of the City with an excellent track record of growth over the years helped by an ever-larger product portfolio and a strong balance sheet. The Baxalta acquisition earlier this year significantly increased the size of the business thereby giving it more marketing power. Although not as widely known as its blue chip counterparts GlaxoSmithKline and AstraZeneca, Shire has grown into a £41bn business that has progressed well from the specialist Attention Deficit Disorder (ADD) treatments for which it’s best known.

Our friends in the City are expecting revenues to come in just shy of £9bn for the full year to the end of December, with pre-tax profits rising passed the £3bn mark. Furthermore, analysts are predicting a massive 84% rise in underlying earnings to £3.1bn, with a further 19% improvement pencilled-in for 2017. If these growth projections are realised, Shire will be trading on a very undemanding price-to-earnings ratio of 12 by the end of next year. At current levels the shares look far too cheap given the earnings outlook.

Brexit boost

International equipment rental firm Ashtead Group (LSE: AHT) says it expects full year results to be ahead of expectations after having benefitted from the weaker pound in the first quarter of its financial year thanks to the Brexit vote. The group revealed that total rental revenues were up by 12% to £661m with underlying operating profits rising by 4% to £206.6m, compared to £180.2m for the same period a year earlier.

Shares in the London-based group dipped to below 800p at the start of the year, which many will now see as a missed opportunity, with the shares having rallied to all-time highs of 1,347p last month. But I think there’s still plenty more to come from Ashtead, with double-digit growth anticipated for the next couple of years and a very appealing earnings multiple that falls to 11 by the end of fiscal 2018.

The post Are these the FTSE 100’s hottest growth stocks? appeared first on The Motley Fool UK.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Short-term benefits

Those concerned by June’s Brexit vote and slowing global growth would probably be assuaged by WPP’s latest set of results. Revenues for the first half of its 2016 financial year expanded 9.3%, and that helped pre-tax profits to rise 15.8%, to £690m.

However, it is worth pointing out that WPP had benefited from a number of short-term events, such as Euro 2016, the Rio Olympics and the upcoming US presidential election, all of which helped to drive an increase in global advertising spending this year.

Looking forward, I expect the headwinds from a slowing global economy to drag on earnings more noticeably as this seasonal effect dissipates. After all, advertising revenues are highly correlated with the pace of economic growth.

Trading on a price-to-earnings (P/E) ratio of 18.0, WPP doesn’t look particularly appealing. But thanks in part to a weak pound, city analysts expect adjusted EPS to climb 16% this year, which means its forward P/E falls to a more reasonable figure of 15.8.

From an income perspective, the stock is more attractive given expectations of robust dividend growth over the next two year. For 2016, city analysts forecast dividends to rise of 20%, with a further increase of 11% pencilled in for 2017. These gives it prospective yields of 3.1% and 3.5% for 2016 and 2017, respectively. And on top of this, management plans on buying back shares worth around 2-3% of its issued share capital each year.

Limited margin growth

Another growth stock looking expensive is food services company Compass Group (LSE: CPG). The company has a great track record in delivering rapid growth, with its shares having delivered a total return of 167% over the past 5 years. But, I’m cautious about how much further shares can climb before a correction kicks in.

Margin expansion came to a halt last year, with underlying operating margins flat at 7.2%, and concerns mounting that rising costs and a focus on expansion mean the potential for margin growth is limited. So although the company has been delivering steady organic revenue growth, earnings growth appears to be slowing because of weakness in margins.

Nevertheless, Compass is exposed to long-term structural tailwinds as the market for outsourcing expands. There’s plenty of scope for expansion because less than half of the global market is currently outsourced and there’s pressure on governments in many countries to make cost savings.

In the short term, the company is set to benefit from the weaker pound. It earns around 90% of its earnings from outside of the UK, so if current exchange rates persist, the group could expect to get a positive earnings translation boost of around 7% on this year’s profits.

The shares are rather expensive though — they currently trade at a forward P/E of 24.3, given forecasts of earnings growth of 11% this year. This also compares unfavourably to its 5-year historical forward P/E of 21.8, which suggests that shares in Compass are overvalued.

The post Are these top growth stocks still worth buying? appeared first on The Motley Fool UK.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.