Looking ahead, the company appears to have significant turnaround potential. Alongside a smaller company which reported positive results on Thursday, it could be worth buying for the long run.

Changing outlook

Since ITV is a cyclical stock, it is relatively sensitive to changes in the macroeconomic outlook for the UK. Following the EU referendum, consumer and business confidence have come under significant pressure. This has led to downgrades for the UK economy’s growth rate, which suggests that companies that are reliant on the UK for their sales could experience a difficult period.

The company has also seen its CEO Adam Crozier depart. Having performed well in his role in recent years and having been a key part of transforming the company’s operational and financial performance, it is perhaps understandable that investors are cautious about his replacement, Carolyn McCall. However, with a solid track record and plans for a new growth strategy, the market may be underestimating her potential impact over the medium term.

Investment potential

With ITV’s share price having fallen in the last year, it now trades on a price-to-earnings (P/E) ratio of around 12. This suggests that it could offer a wide margin of safety. Of course, its forecast fall in earnings of 4% this year and lacklustre growth outlook of just 1% in 2019 indicate that the stock could take time to deliver improved performance.

However, with a 4.8% dividend yield that is covered 1.9 times by profit, the total return potential of the stock could be impressive. With a favourable interest rate environment set to remain in the UK and an updated strategy having the potential to catalyse its financial performance, further underperformance of the FTSE 100 may not be the norm for ITV over the medium term.

Growth potential

Also offering the potential to generate high total returns relative to the FTSE is marketing company for the gaming sector Veltyco (LSE: VLTY). It reported encouraging full-year results on Thursday which suggest that its current valuation may be too low.

The company delivered revenue growth of 165%, with sales rising from €6.1m in 2017 to €16.2m in 2018. This was boosted by acquisitions, with the company continuing to be active in the M&A space following the period end. And with its operating EBITDA (earnings before interest, tax, depreciation and amortisation) increasing by 260% to €8.1m during the year, it seems to be in a strong position to generate further growth in the long run.

Despite this, Veltyco trades on a price-to-earnings growth (PEG) ratio of 1.9 at the present time. Although it is a relatively small stock which is risky due in part to its ambitious growth plans, its return potential could be impressive. As such, for less risk-averse investors, it could be worth a closer look for the long run.

The post The ITV share price: why is it underperforming the FTSE 100? appeared first on The Motley Fool UK.

An improving outlook

One such company is housebuilder Taylor Wimpey (LSE: TW). It has experienced an uncertain period since the EU referendum, with its share price being highly volatile. Investors seem to be unsure about the prospects for the wider industry than they were a few years ago, with there being the potential for a decline in demand for new housing as the effects of Brexit on the economy continue to be felt.

However, the reality is that there is a major lack of supply of new homes. Even if the UK’s population growth ground to a halt, it would still take many years for the supply deficit of new homes to be reduced to zero. And with population growth expected to remain at current levels in future years, the prospects for the housing market seem positive. This may lead to improved financial performance for housebuilders.

A low valuation

Despite a positive outlook for the housing market, Taylor Wimpey continues to trade on a relatively low valuation. It has a price-to-earnings (P/E) ratio of around 8.8 using 2018’s forecast earnings figure. With its bottom line due to rise by 4% next year, it could trade on an even more appealing valuation in future. This could prompt investors to become more attracted to its long-term growth story.

While the outlook for the housebuilding market may be uncertain, the company has made improvements to its balance sheet in recent years. They should reduce its future risks, while a large land portfolio means the company has an entrenched position in what may prove to be a strong growth market in the long run.

Growth at a reasonable price

Also offering a low valuation and improving profit potential is online marketing company Veltyco (LSE: VLTY). It released a positive trading update on Monday which showed that trading in December continued to be strong. In fact, it now expects its results for the 2017 financial year to be significantly ahead of market expectations. Net revenues are now due to be in excess of €14.5m, with EBITDA (earnings before interest, tax, depreciation and amortisation) to be above €8m.

With Veltyco trading on a price-to-earnings growth (PEG) ratio of 1.7, the company seems to offer growth at a reasonable price. Its shares are already up over 10% following its trading update, and it would be unsurprising for them to continue to make gains in the near term. With its trading conditions being generally positive, the company seems to be in a strong position to deliver above average earnings growth in future years. As such, it could prove to be a sound investment.

The post Taylor Wimpey plc isn’t the only bargain growth stock I’d buy today appeared first on The Motley Fool UK.

In turn, this could mean that the company is able to command a higher valuation as investors begin to price-in greater earnings power. As such, now could be a perfect time to buy the oil major while it still trades at a relatively low price.

Improving outlook

After a number of years of significant challenges, it looks as though BP could finally be turning a corner. The company is forecast to return to profitability in the current year after two years of losses. This seems to have improved investor sentiment in the firm, with its stock price rising by over 11% during the last three months.

This situation could continue over the medium term. It is forecast to record a rise in its bottom line of 34% in the next financial year as investment in its asset base and improved prospects for the oil price are expected to continue. Despite this, BP trades on a price-to-earnings growth (PEG) ratio of just 0.5. This suggests that it may be undervalued at the present time.

With the supply surplus of oil expected to be kept in check to at least some degree by rising demand and the potential for further supply restrictions from OPEC, the outlook for the oil price may be positive. This could mean that now is the right time to buy BP ahead of what may be a significantly improved financial period for the business.

Improving performance

Also offering the prospect of growth potential at a reasonable price is Veltyco (LSE: VLTY). The online marketing company for the gaming industry released a trading update on Tuesday which showed that its strategy is performing well. In fact, trading since its interim results were released in September has been strong. This means that the company now expects revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) to be significantly ahead of market expectations for the current year.

Since the interim results, the company has continued to grow. The Bet90 brand has launched its new website which has performed well. Bet90 is also expected to enter the South American market and this could positively impact on the overall performance of Veltyco.

Looking ahead, it is forecast to post a rise in its bottom line of 6% in the next financial year. This puts it on a PEG ratio of only 1.6, which suggests that it could offer excellent value for money at the present time. Certainly, it is a relatively small company which could remain volatile over the short run. However, with its shares rising by 16% following Tuesday’s update, investor sentiment appears to be strong and this could help to push its share price higher.

The post Why BP plc could make you brilliantly rich appeared first on The Motley Fool UK.

It looks like the first part of that has already happened to Veltyco Group (LSE: VLTY), whose shares have quadrupled in the past 12 months — but are they expensive now?

Veltyco, which is in the business of marketing for the online gaming, lottery and binary option businesses, only came to market in June 2016.

At the time, it was already profitable — but only just, with a mere £60,000 pre-tax profit reported by December 2016. So it’s understandable if investors were wary at that early stage.

Cracking results

But first-half results were seriously impressive, after revenues tripled to €6.4m and beat the entire previous year, and EBITDA five-bagged to €3.8m (which was 80% up on the whole of 2016).

At this stage I think we’re looking at a potential cash cow, with the company reporting interim net cash of €1.3m and telling us it’s considering paying a maiden dividend in 2018, depending on how 2017 full-year results turn out.

And that share price… it picked up 10% in morning trading Wednesday after Veltyco revealed a new partnership with video game competition site Esports.com, and said it has taken a small stake in the company too.

With the shares at 94p, as I write, what about valuation?

Even after such a meteoric rise, full-year forecasts are so strong we’re still only looking at a forward P/E of around 12, dropping to 11.6 on 2018 expectations.

I can only see further growth here.

Finally got it right?

After years of volatility and no overall price gain in nearly 20 years, shares in Games Workshop Group (LSE: GAW) have taken off like a rocket over the last year — they’ve more than trebled in value in 12 months to 2,030p.

After a gradual climb, June’s trading update ahead of full-year results inspired a spike, and since then it’s just been up and up. In the end, the year to May 2017 saw a 127% rise in pre-tax profit coupled with an 84% hike in operating cash generation.

Earnings per share more than doubled to 95.1p, and the dividend was lifted by 85% to 74p per share.

Chief executive Kevin Rountree described the year as a “fun and exciting” one, suggesting that “prospects for the business are good” — and at least the second part of that seems modest.

Strong margins

A sales boost from the fall in sterling has certainly helped, as most of the company’s sales are overseas, but I see another long-term cash cow here too. Games Workshop’s margins are high, with a very impressive gross margin of 72.4% for 2017, and it really doesn’t require a lot of capital expenditure to keep it going.

And though it’s taken a long time for the share price to get moving, the company has been paying out handsome dividends for years.

This year is already off to a good start, with Q1 sales and profits “well above the same period in the prior year” and the firm telling us we should be seeing expectations-busting results this year.

Forecast dividends of 100p would provide a yield of 4.9% with the shares on a P/E of 15, and that looks good to me.

The post 2 small-cap growth stocks that could make you fabulously rich appeared first on The Motley Fool UK.

The stock has gained 350% in value since last September, and added 14% in Monday business alone following a buoyant response to half-year numbers.

Veltyco — which provides marketing services to the gaming, binary options and lottery sectors — advised that revenues tore 202% higher between January-June, to €6.36m, a result that exceeded total sales worth €6.08m punched in the whole of 2016.

As a result, EBITDA in the period exploded 410% in the six-month period, to €3.8m,

Commenting on the interim results, chairman David Mathewson said: “It has been an exciting first half year of 2017 for the group and we are very happy to see such a strong trading performance during this period, which produced very good results for the period reported.”

And this fizzy first-half result was not the only reason for Veltyco to celebrate. Indeed, Mathewson noted that “trading in the third quarter of 2017 continues to be strong and we now expect the business will exceed current market expectations for the full year.”

The Isle of Man-based firm completed the acquisition of 51% stakes in both the Bet90 online operations and Tippen4you.com operations in the period. And the Veltyco chairman advised that the company “[continues] to review potential acquisition opportunities which fit into the company’s profile.”

Profits ready for lift-off?

So it should come as no surprise that the City expects earnings at Veltyco to shoot higher in the near term and beyond. In 2017 earnings are predicted to swell to 7.1 euro cents per share from fractional earnings last year. And another further meaty increase, to 8.1 cents, is forecast for 2018.

Moreover, current forecasts make the marketing star great value for money — a prospective P/E ratio of 15.5 times falls just roughly in line with the widely-considered value yardstick of 15 times. I reckon this makes Veltyco worthy of serious attention given the titanic revenues potential of its M&A strategy.

Another growth great

4Imprint Group (LSE: FOUR) is another ‘under the radar’ share that has continued marching skywards in recent times. Indeed, the marketing products producer has seen its share price surge by around a quarter during the past six weeks following a bubbly reception to half-year results back at the start of August.

4Imprint advised that revenues rose 11% between January and June, to $298.1m, a turnout that propelled underlying pre-tax profit 15% higher to $16.5m. Stock pickers piled in on news that “organic revenue growth in both North American and UK markets continues to outpace the growth rates of the industry as a whole,” with both customer numbers and orders continuing to steadily rattle higher.

And City analysts expect earnings to keep galloping northwards. Bottom-line rises of 10% are chalked in for both 2017 and 2018, and while current forecasts may produce a slightly-hefty forward P/E ratio of 24 times, I reckon this still represents decent value given 4Imprint’s terrific sales momentum.

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