With the pound falling and prices rising, and belts being tightened as we head towards the EU exit door,you might not think this is a great time to be looking forgrowth shares. But I reckon there are some great-looking prospects out there.
Solid sector
Seekingbusiness that operate beyond our shores is one way to go, and the motor trade around the world is looking pretty healthy right now. And thats helped engineer GKN (LSE: GKN), which leads the field in manufacturing vehicle drive shafts and axle joints, to an impressive year last year.
After a couple of flat years, 2016 saw sales grow by 22%, with underlying pre-tax profit and EPS both up 12%. Chief executiveNigel Stein said We expect 2017 to be another year of further growth, and judging by Wednesdays first-quarter update, that looks like whats happening.
The firm told us that the automotive market has performed better than expected, though the aerospace business is slightly slower than planned. MrStein cautioned us that the initial rate of growth might not be sustained, but reiterated his expectationofoverallgrowth for the year.
The shares have picked up 38% since a low in June last year, but Istill think theyre looking like very good value. Continued EPS rises forecast for this year and next would drop the P/E to the 10 levelby 2018.
Dividends arent massive with yields of only around 2.6%, but theyre gaining faster than inflationand are very well covered and theyrereally just a bonus for what I see as essentially a growth share at this stage.
All in all, I see a strongly cash-generative company here, with very modest net debt of around 700m for a 6bn company.
The last couple of years have seen some restructuring, and whats come out of it looks to me like a company thats set nicely for the next decade and more.
Soaring healthcare
If your idea of a growth share is a newly-listed smaller cap share that looksset for stellar growth in the short to medium term, thenGeorgia Healthcare (LSE: GHG) might be just up your street.
Since flotation in November 2015 on Londons main market (and not AIM, note), the shares have almost doubled to 357.5p and thats even after an initial drop.
Whats perhaps unusual for a market newcomer is that the firm has been making a profit right from the start, ramped it up very nicely in 2016, and has two years of very strong growth forecast for this year and next.
Although weve seen relatively high P/E valuations, that strong growth has provided low PEG multiples with forecasts for the same for another two years anything around 0.7 or under is generally considered attractive, and were looking at 0.7 and 0.5 for 2017 and 2018.
If the mooted growth comes off, the P/E would drop to under 17 next year, and I see that as very undemanding for such a shiny growth star.
Now, its in Georgia, which addsrisk. But its the biggest healthcare provider in that nation, and also the countrys biggest medical insurance provider and is big in pharmaceuticals.
All in all, it might be small and distant pond, butGeorgia Healthcare isa very big fish in it. And I could see the shares easily doubling in the next five years.
Growth with dividends
In the tough decision of whether to go for growth or dividends, what better than an investment that can provide both?That’s exactly what the subject of ourTop Growth Share From The Motley Fool report offers.
The pastfive years have brought indouble-digit annual earnings growth, and the City’s experts are predicting two more years of solid riseson top of that. And there’s aprogressive dividend policyto add to the mix.
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