Attention seems very much focused on the FTSE 100 and its meanderings above and below the 7,000 level right now. But with the UK economy arguably set for a new period of growth, should we not be looking to the slightly smaller companies of the FTSE 250? I reckon there are rich pickings there, and here are five that have caught my attention as possible growth prospects:
Redrow
Redrow (LSE: RDW) builds houses, and housebuilders are stupidly cheap — and it really does seem to be as simple as that. Since mid-2012 we’ve seen a three-fold rise in the Redrow share price to 357p, but even after that we’re still looking at P/E multiples of under nine this year and dropping to less than eight on 2016 forecasts. These are companies that built up their land banks at knock-down prices and are set to reap the profits over the next ten years.
Investec
Investec (LSE: INVP) is a specialist banking and investment firm, and it’s just the kind of company I’d expect to do well when economies get firmly back to recovery. With growth forecasts suggesting a P/E for March 2017 of under 11 and a PEG ratio of 0.6 for 2016 followed by 0.8, we’re looking at a definite growth prospect. Couple that with expected dividend yields of 4 to 5% over the next couple of years, and it’s surely worth a closer look.
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Pace
How about Pace (LSE: PIC), the digital TV technologist? The shares are down 24% over the past 12 months to 341p, but the P/E could well be bottoming out at around eight based on 2016 estimates. With a return to EPS growth forecast for that year, is it worth a punt now? Well, Pace has put in a good spell of strong EPS growth, and in a relatively lean year its shares do look a little oversold to me.
Moneysupermarket.Com
Moneysupermarket.Com (LSE: MONY) shares have more than trebled over the past five years, to 270p, but is there anything left? The shares are highly valued on forward P/E multiples of 21 and 19 for this year and next, with dividend yields only a little above the FTSE average at 3.3 to 3.5%. But if long-term growth lives up to expectations, we could still be looking at a bargain here.
Stagecoach
Our fifth here, Stagecoach (LSE: SGC), has faced uncertain times during the recession. But it kept earnings reasonably stable and, perhaps more importantly, progressively lifted its well-covered dividend through the past five years. The year to April 2015 should be flat, but we have double-digit EPS growth forecast for the following two years. With dividend yields of around 3% and rising, Stagecoach looks like a relatively safe growth prospect.
