In light of the U.K. announcing its new prime minister, five stocks trading on the London Stock Exchange that have strong growth potential are Creightons PLC (LSE:CRL, Financial), Dart Group PLC (LSE:DTG, Financial), Latham (James) PLC (LSE:LTHM, Financial), Ocado Group PLC (LSE:OCDO, Financial) and Staffline Group PLC (LSE:STAF, Financial).
According to CNBC, Brexit leader Boris Johnson received 92,153 votes from members of the ruling Conservative Party, approximately twice the number of votes his competitor Jeremy Hunt received. Johnson will succeed former Prime Minister Theresa May on Wednesday.
Brief discussion about the Peter Lynch Growth Screen
The Peter Lynch Growth With Lower Valuation Screener, one of GuruFocus’ predefined screens within the All-in-One Screener, seeks companies that have the following characteristics: a GuruFocus business predictability rank of at least two stars, a trailing-12-month price-earnings ratio less than 14 and a 10-year revenue growth rate of at least 6%.
Legendary investor Peter Lynch developed his earnings line at 15 times earnings; thus, setting the filter in which the price-earnings ratio is less than 14 limits results to companies trading below the earnings line. Further, since Lynch warned about volatile earnings from cyclical sectors like basic materials, consumer discretionary and financial services, such sectors are excluded from the screener.
CreightonsÂ
Peterborough, Cambridgeshire-based Creightons manufactures toiletries and fragrances made exclusively from natural products. GuruFocus ranks the company’s profitability 7 out of 10 on several positive investing signs, which include a three-year revenue growth rate that outperforms 88.13% of global competitors and operating margins that have increased approximately 22.80% per year on average over the past five years despite underperforming 56% of global competitors.
Creightons’ financial strength ranks 8 out of 10 on the heels of robust interest coverage, a solid Altman Z-score of 6.09, and debt ratios that are outperforming over 87% of global consumer packaged goods companies.
Dart Group
Dart Group, the company that operates low-cost carrier Jet2.com, provides licensed packages for leisure flights at a multitude of vacation destinations. GuruFocus ranks the company’s profitability 8 out of 10 on several positive indicators, which include a four-star business predictability rank and a three-year revenue growth rate that outperforms 93.33% of global competitors. Additionally, operating margins are expanding approximately 11.70% per year on average over the past five years despite underperforming 71% of global airline competitors.
James LathamÂ
Hemel Hempstead, Hertfordshire-based James Latham imports and distributes wood-based sheet materials that provide a wide range of wood-based panel products. GuruFocus ranks the company’s financial strength 9.2 out of 10 on several positive indicators, which include a strong Altman Z-score of 6.12 and debt ratios that outperform over 99% of global industrial production competitors. Despite this, the company’s profitability ranks 7 out of 10 on the heels of a modest Piotroski F-score of 5 and a Beneish M-score that signals earnings manipulation.
Ocado
Hatfield, Hertfordshire-based Ocado operates under brands like Ocado, Sizzle and Fetch, built on technology and logistics platforms. GuruFocus ranks the company’s financial strength 6 out of 10: Although debt ratios are underperforming over 64% of global competitors, Ocado has a cash-debt ratio of 1 and a strong Altman Z-score of 7.53. Additionally, Ocado’s three-year revenue growth rate of 13% is outperforming 66.39% of global competitors.
Staffline
Nottingham-based Staffline provides recruitment and outsourced human resource services. GuruFocus ranks the company’s financial strength 5.9 out of 10: Although the company has a strong Altman Z-score of 3.74, Staffline’s debt ratios are underperforming over 77% of global competitors. Additionally, Staffline’s profit margins have declined while the company’s long-term debt has increased by 6.5 million pounds (approximately $8 million) during the past three years. Despite this, the company’s three-year revenue growth rate of 17.10% outperforms 62.26% of global competitors.
Disclosure: No positions.
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