Most of my share picks these days tend to be based on dividends. But for a bit of diversification Ive been investigating growth candidates as we head into a new annual ISA allowance.
Ive been impressed by the performance ofHilton Food Group (LSE: HFG), which has just delivered another cracking set of full-year results.
The company, which specialises in food packaging, is unusual in including tonnage in its figures, with 2018 volumes up 13.5% to 344,784 tonnes. That brought in a revenue gain of21.5%, leading to a 26.7% boost to pre-tax profit, and a 20.2% hike in earnings per share.
Expansion
The only slight downer for me was seeing 2017s net cash of 25.4m turning into net debt of 26.8m, but there have been acquisitions during the year.
ChairmanRobert Watson said: In 2018, we continued to deliver on our strategic objectives to build a significantly bigger and more diversified business, and that includes global expansion, with the development of Australian joint ventures playing a significant part. If that continues, a modest level of net debt wont really worry me.
Hiltons recent steady earnings growth is forecast to continue for the next couple of years, and that comes at a price. Were looking at P/E multiples of 22 and 19 for 2019 and 2020, which some might see as high for such an unexciting business as food packaging.
But give me well-managed dullness every time and a progressive dividend yielding around 2.5% adds an extra little attraction.
Favourite
Im always wary of investing in companies to which I have a personal attraction, and that includes Greggs (LSE: GRG). But when I went there this morning to get my breakfast steak and cheese baguette, the place was crowded, as it typically is, while Subway a few doors away was, as usual, pretty much deserted.
Greggs has been growing its earnings for a number of years, bucking the trend of economic squeezes and belt-tightening. It goes to show that high-quality and modestly-priced high street food offerings will still attract the breakfast and lunch crowd even in tough times.
Another thing I like about Greggs is its marketing success in developing its brand. I think its vegan sausage roll promotion was masterful, as was its response to critics. And one of the things I look forward to most when were approaching Christmas is a Greggs Festive Bake.
Bright future
Expanding its offering to pre-packed frozen food market seems like a canny move too, and like my colleagueTezcan Gecgil, I can see Greggs management quality leading to a healthy long-term future for the company.
But if theres a downside, its the share price. At P/E multiples of more than 20, it looks at least fully-valued to me, and I dont see the same expansion possibilities (especially not internationally) as I expect from Hilton Foods.
Well-covered dividend yields of a little over 2% add some attraction. But with the share price having soared since mid-2018, Im half expecting to see it faltering for much of 2019 as investors take profits.
Still, I have until April 2020 to use my next ISA allowance, so Ill be watching where the Hilton Foods and Greggs share prices go.
