Pensions specialist Xafinity (LSE: XAF) listed on the London Stock Exchange inFebruary, and there has been very little overall change in its share price since then a rise of 1.3% as of Tuesday, but witha drop after Wednesdays full-year results the shares are now down an overall 3.4%.
Its tricky to evaluate this set of figures, as its blighted by one-off IPO items which iswhat led to the pre-tax loss of 12.8m after a profit of 3m in2016.
But adjusted earnings per share of 8.1p, up 4%, suggests a P/E of a little over 20, implying theres significant growth built in to the current share price and I think that growth potential is there.
50m raised from the flotation was used to repay some existing debt facilities, dropping the debt figure to 33m immediately after flotation, from 86m. And since then its been reduced further to 28m. Thats 1.6 times adjusted EBITDA, and does not look onerous.
Pensions freedom
National Pension Trust assets under management rose by around 67%, and the firm was awarded a trivial commutation mandate on a FTSE30 client with an 11bn scheme. Xafinity also signed up eight new clients, and clients should get hold of the firms newly-developed pensions modelling softwareduring the current year.
Liabilities afflicting the nations defined benefit pension schemes, together with increasing demand for alternative opportunitiesfor transferring defined contribution schemes, should provide a fair bit of momentum for firms like Xafinity, which provide both de-risking services and Master Trust pension schemes.
That suggests to me that were looking at a decent growth opportunity especially with worthwhiledividends expected to kick in from next year.
Outsourcing profits
Turning to a far longer established company, shares in Bunzl (LSE: BNZL) are up 3.6% at the time of writing, following an upbeat trading statement.
The distribution and outsourcing group reckons its first-half revenue should be up around 7% at constant exchange rates (with an extra 12% due to currency movements), due to a combination of underlying growth of 3%-4% coupled withthe effect of acquisitions.
Acquisitions are an important part of the companys strategy for growth, with the firm also announcing the takeover of three new businesses in Spain and Canada thats eight new businesses snapped up so far this year for a total of around 290m, adding an extra 370m to annual revenue.
The shares are on a forward P/E of around 20 now, which is arguably modestfor company with significant growth potential, but Im also attracted by what I see as a hidden income opportunity too.
Deceptive dividend
Bunzls dividend yield might look deceptively low at only around 2%, but its been strongly progressive overthe past few years. Forecasts suggest the rate of rise should slow a little but still keep comfortably ahead of inflation, and I think progressive long-term growth is more important than a higher-but-static yield today.
If youd bought someshares nearthe end of 2012 at around924p, youd now be looking at an effective forecast dividend yield of 4.9% on your original purchase price and youd have enjoyed a share price appreciationof approximately 150%.
Overall, I see Bunzl as a company offeringa solid and well-managedbusiness where acquisition is a desirable strategy,and capable of providing an attractive stream of returns through capital growth and income.
A growth and dividend combinationcan make you rich
Whether you buy stockslike these that provide both growth and dividend potential, or you prefer a different strategy, investing in shares has one key goal. It’s Financial Independence, anessential achievement for those who want to Retire Early.
And it really can be done, asThe Foolish Guide To Financial Independence explains. Looking at ways to reduce your outgoings while building your cash, and giving you a few ideas for great investments, this brand new report is a must-read for any aspiring young retiree.
It’s completely free, soall you need to do is click here for your personal copy today.