MobileIron Loses Its Head

A change in the CEO spot could mean elevated execution risks and near-term disruption.

Advertisements

Are these FTSE 100 stocks getting too expensive?

Two traders looking at stock market screens

Pest control company Rentokil Initial (LSE: RTO) today reported a 13.7% rise in ongoing third-quarter revenues to £579.5m, as the contribution of recent acquisitions helped to bolster its financial performance.

Organic growth

However, organic revenue growth also accelerated from 3.1% last year, to 3.7%, reflecting strong demand increases for its pest control products and higher brand popularity. Rentokil highlighted continuing strong performances in Asia, Pacific, Latin America, and in its largest market, North America, while Europe also delivered a further improvement in ongoing revenue expansion, with revenues in France up 2.4% year-on-year.

On the downside though, the firm warned of disruption to trading from recent hurricanes, which devastated the Caribbean and some southern states in the US in September. Though trading has now returned to normal in most of these markets, business in Puerto Rico is expected to remain severely impacted for some time.

Ongoing progress

Nevertheless, CEO Andy Ransom was pleased with the ongoing progress and in today’s announcement said: “It has been a good period for M&A with six businesses acquired in Growth and Emerging markets, principally in Pest Control…Notwithstanding the impact of severe weather conditions on some of our businesses in the third quarter, prospects remain good for the remainder of the year across the majority of our markets, and our guidance for the full year is unchanged.”

Valuations

City analysts are sanguine with forecasts of underlying earnings per share growth of 12% in 2017 and 9% in 2018.  However, I’m concerned about valuations — shares in the company trade at 25.2 times forward earnings, against its five-year historical average of 17.2 times.

Too pricey

Another FTSE 100 stock that I believe is beginning to look too pricey is product inspection services firm Intertek Group (LSE: ITRK). The London-headquartered group is one of the world’s leading providers of assurance, testing, inspection and certification services to a wide range of industries, which include chemicals, energy, food, retail and healthcare.

Although the company’s revenue stability and its highly cash generative earnings model have meant Intertek has historically traded at a premium to the rest of the market, its shares appear to me to be getting ahead of themselves after recent gains.

Intertek has seen its share price gain 49% since the start of the year, which has elevated its valuations to 27.5 times expected earnings this year. That compares unfavourably to its five-year historical average for forward P/E of 21.9 times and puts the stock on a significant premium to the sector median of 17.1 times.

What’s more, this doesn’t seem justified on City forecasts for underlying earnings per share growth of 11% in 2017 and 7% in 2018, which are only modestly higher than the estimates for its sector peers. As such, I reckon that Intertek’s stock may struggle to gain traction in the near term, in the absence of substantial positive earnings estimate revisions.

The Fool’s top growth pick

If you’re looking to add more growth to your portfolio, then don’t miss out on this free special report: A Top Growth Share From The Motley Fool.

Mark Rogers, a top investor from the Motley Fool, believes he may have discovered a true growth gem. This stock has already delivered triple-digit returns in recent years and he thinks more growth is still to come.

Click here to find out which stock we’re referring to. It’s completely free and there’s no further obligation.

More reading

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended Intertek. 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.

2 FTSE 100 shares that could make you stinking rich

notes cash sterling

I believe Schroders (LSE: SDR) ambitious plans to turbocharge business across Asia, North  America and Europe should set it on course for exceptional profits growth in the years ahead.

The asset manager advised in a bubbly trading statement on Thursday that assets under management stomped to a record high in the third quarter, up 9% from the start of the year to stand at £430.2m as of the end of September.

At its core Institutional division, assets on its books rose to £247.4m from £226.3m at the start of the year. And looking on the Intermediary side, assets under management increased to £128.1m from £120.1m previously.

Master manager

As well as looking increasingly towards foreign shores to generate future business (it already operates out of 27 countries), Schroders is aiming to keep assets piling higher by doubling-down on product diversification and by focusing on key growth themes like retirement solutions and emerging markets.

Accordingly the City is pencilling in handsome earnings growth for the near-term and beyond. Schroders is predicted to deliver a 10% earnings improvement in 2017, and an extra 7% rise is predicted for next year. As a result the financial services colossus changes hands on a forward P/E ratio of 16.9 times, decent value in my opinion given the company’s excellent momentum.

Meanwhile, those seeking mighty dividend growth down the line should also pay the FTSE 100 business close attention, I reckon. Last year’s reward of 93p per share is anticipated to rise to 103p this year, yielding 3%, and again to 109p in 2018, resulting in a tasty 3.1% yield.

Schroders hit record tops above £35 per share earlier this month, and its share price has scrambled 24% higher during the course of the past year alone. I expect much, much more to come as its momentum in hugely-lucrative international growth markets picks up.

Build a fortune

CRH (LSE: CRH) has proved a go-to earnings generator in years gone by and, with its appetite for M&A action showing no sign of slowing, I am backing the building materials mammoth to keep on swelling the bottom line.

And I am not alone either. The Square Mile’s army of analysts are forecasting earnings expansion of 14% and 13% in 2017 and 2018 respectively. As if this wasn’t enough, like Schroders, CRH is also expected to keep lifting dividends at a healthy rate.

A payment of 67.5 euro cents per share is predicted for this year, creating a tasty 2.2% yield. And the yield moves to 2.3% for 2018 thanks to predictions of a 70.6 cent reward.

CRH made a bid for Kansas-based cement specialist Ash Grove for $3.5bn back in September and, while the move has been derailed by a $3.7bn-$3.8bn offer from another suitor, it underlines the company’s desire to keep the acquisitions coming thick and fast. Indeed, with the business committed to building its global footprint to light a fire under future earnings, I reckon it is worthy of its slightly-elevated prospective P/E ratio of 17.8 times.

Top tips to help you retire rich

There are plenty of shares out there that can make you rich. But is it really possible to make a million from your stocks portfolio?

Well, this special Fool report gives you the tools that could help you do just that.

The Motley Fool’s 10 Steps To Making A Million In The Market report reveals a flurry of wise investment themes and strategies to help investors make a fortune from their investments.

Click here to enjoy this exclusive wealth report.  It’s 100% free and comes with no obligation.

More reading

Royston Wild 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.

One FTSE 100 growth stock I’d buy and one I’d avoid

FTSE 100 Share prices going up

The London Stock Exchange Group (LSE: LSE) today released an upbeat interim management statement that should give investors confidence in its future outlook.

Third quarter revenues increased by 18% on the same period last year, from £376m to £443m, as strong growth in information and post-trade services helped to sustain its double-digit advance in year-on-year revenues. These figures show how resilient trading has been for the group in the wake of its aborted merger with Deutsche Boerse and ongoing Brexit uncertainty.

CEO steps down

Still, shares in the group fell by as much 2% today, as its recent robust financial performance was overshadowed by news that Xavier Rolet would be stepping down as chief executive of the group by the end of December next year.

Rolet joined the group from Lehman Brothers in 2009 and under his tenure, the LSE has transformed itself from a company which was overly reliant on its sluggish traditional equities business into a fast-growing diversified financial markets infrastructure business. He has achieved this by embarking on a series of ambitious acquisitions, pushing the group deep into post-trade services such as clearing, custody and settlement — a booming area benefitting from new derivative rules which have been driving activity towards centralised venues.

Future growth

Looking ahead, I expect his successor will stick to its current strategy of reducing its dependence on traditional equity markets and continue to develop new products and services. I reckon this should help to deliver future growth momentum to the company and increased cash returns to shareholders. City analysts are optimistic too, with forecasts of earnings-per-share growth of 22% and 13% in 2017 and 2018, respectively.

Overall, the LSE has many attractive qualities and it seems as if the company’s growth story is far from over.

Too expensive

Meanwhile, I’m less sanguine about Bristol-based investment management firm Hargreaves Lansdown (LSE: HL). At 31 times forward earnings this year, shares in the company seem too highly rated.

Although Hargreaves is seeing strong growth in assets under administration, the company also faces a number of challenges. Firstly, it’s important to note that the firm has benefitted from a number of one-off factors which should not recur, but helped to compensate for a weak macroeconomic environment, such as the introduction of the Lifetime ISA and the increased ISA allowance.

Second, market conditions are getting more competitive as new entrants threaten to challenge incumbent firms with drastically lower fees. For example, US fund manager Vanguard, which has historically shied away from dealing directly with retail investors, recently launched its own platform to give investors direct access to Vanguard’s range of funds at a much lower annual administration fee of just 0.15%.

And lastly, the stock’s income prospects fail to impress, after a review into its requirements by the Financial Conduct Authority found it had insufficient regulatory capital surplus. As such, Hargreaves did not pay a special dividend this year, which meant total dividends in 2017 fell 15% on the previous year, to 29p a share, giving its shares a lacklustre 1.9% yield.

The Fool’s top growth pick

If you’re looking to add more growth to your portfolio, then don’t miss out on this free special report: A Top Growth Share From The Motley Fool.

Mark Rogers, a top investor from the Motley Fool, believes he may have discovered a true growth gem. This stock has already delivered triple-digit returns in recent years and he thinks more growth is still to come.

Click here to find out which stock we’re referring to. It’s completely free and there’s no further obligation.

More reading

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

These 2 hot growth stocks could turbo-charge your pension

turbo

A balanced portfolio of stocks and shares is a great way to save for retirement. Amid the solid blue-chips and income stocks, you also need a bit of acceleration. These two could help you hit the gas.

Going for growth

Infrastructure and support services company Stobart Group (LSE: STOB) has just published its interim results for the six months ended 31 August, and rewarded investors with a big juicy dividend. The FTSE 250 firm upped its dividend from 3p to 4.5p per quarter, a rise of 50%, as it increased its underlying EBITDA to £131.8m. However, today’s profits are mostly made up of £123.9m from the partial disposal of its stake in Eddie Stobart Logistics (ESL), which generated £112m in net cash. The company’s revenue almost doubled to £124.6m in the period, compared to £65.3m a year earlier.

CEO Warwick Brady said the group continues to work towards its clear targets for its three growth divisions – Energy, Aviation and Rail & Civil Engineering, and is also “driving growth in cash generation and returns to our shareholders”

Losing power

Stobart Aviation saw good progress, with passenger numbers at London Southend Airport up 25% year-on-year to 610,492. However, 
Stobart Energy experienced delays in the commissioning of new third party biomass power stations which have impacted short-term volumes by 33%, although EBITDA per tonne is ahead of target and long-term volume unaffected.

Stobart Rail & Civil Engineering is on track to deliver 
target EBITDA on rail and non-rail civil engineering projects, against a reduction in external revenue. 
Stobart Infrastructure and Stobart Investments benefitted from the partial disposal of the investment in ESL, in which the group retains a 12.5% stake.

Shine on

The stock currently yields a healthy 5%, forecast to hit an even more tempting 6.5%. That is pretty impressive, especially when you take into account its rampant share price growth, soaring 193% in the last three years.

City forecasters predict a 74% drop in earnings per share in the year to 28 February 2018, but never fear, they are pencilling in a whopping 276% growth in 2019. However, there is a price to pay for its turbo-charged prospects, with the stock valued at a hefty 34 times earnings.

High energy

Kingspan Group (LSE: KGP) has also had a strong year, its share price up an impressive 50% from 24p to 36p in the last 12 months. The firm, which provides insulation products for roofs, wall and floors, posted a solid first half, with revenue up 19% to €1.75bn, and trading profit up 6% to €177.8m. Revenues have been rising particularly strongly, up 20% from €1.47bn to €1.75m year-on-year.

Kingspan’s growth is being drive by increasing demand for greater energy efficiency, the robust European recovery and surprisingly resilient UK despite Brexit. Its strong balance sheet allows it to invest in the business and drive growth with €14m earmarked for acquisitions. It recently entered the lucrative South American market.

The group has posted five consecutive years of double-digit earnings per-share growth, including a spectacular 77% in 2015, and another 35% last year. City forecasters reckon this will slow, to 8% in both 2017 and 2018, but its prospects still look bright to me.

Investing in top growth stocks like these two can shave years off your working life and allow you to enjoy a fruitful retirement as well.

This BRAND NEW special Motley Fool report, The Foolish Guide to Financial Independence, sets out exactly what you need to do if you want to retire earlier than your parents did.

Even if you love your job wouldn’t you prefer to take control over when you retire? If so, we can show you how to do it. Simply click here to read this free no-obligation report.

More reading

Harvey Jones 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.