Today I’m looking at two growth heroes you can buy today and stash away for the years ahead: WH Smith (LSE: SMWH) and Ryanair Group (LSE: RYA).
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WH Smith’s share price has gone off the boil more recently, its market value shrinking 13% since the record peaks around £23.50 struck in the dying moments of 2017. This represents a prime buying opportunity for me.
You see, the stationer and newsagent’s decision to double down on its Travel division is paying off handsomely, with sales here rising 7% in the 20 weeks to January 20 (or 3% on a like-for-like basis). This division now accounts for two-thirds of total profits and it is likely to keep rolling as international expansion continues and there are now has 249 outlets open in overseas territories.
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WH Smith already has a long record of earnings growth behind it, and it is expected to keep this record rolling with rises of 5% and 7% during the years to August 2018 and 2019 respectively.
An added incentive for stock pickers comes in the form of WH Smith’s ultra-progressive dividend policy. Rewards have swelled 57% during the past five years, and City analysts are expecting further hefty growth in the medium term at least.
A payment of 51.6p per share is forecast for this year, up from 48.2p in fiscal 2017. And dividends are expected to advance again to 55.8p next year. As a consequence investors can enjoy handy yields of 2.5% and 2.7% for this year and next.
All is not quite well in the garden as tough trading conditions hamper the performance of WH Smith’s High Street division. Like-for-like sales here dropped 4% in the first 20 weeks of the current year.
Still, the hard work the company is undertaking to turn around this ailing division, allied with the excellent long-term revenues outlook for its Travel division as expansion continues against a backcloth of booming global traveller numbers, makes it a brilliant selection for long-term stock pickers. And I believe it is worthy of a forward P/E multiple of 18.6 times.
Taking off
Booming demand for low-cost air travel means that Ryanair is another great bet for growth seekers, in my opinion.
The Irish airline has seen earnings rising by double-digit percentages recently and another meaty advance — this time of 14% — is chalked in by Square Mile analysts for the year ending this month. A more modest 3% rise is expected in fiscal 2019.
Ryanair isn’t without its share of risk, of course, given its high fixed cost base and a backcloth of rising competition. However, in my opinion these issues are baked into the flyer’s ultra-low prospective P/E ratio of 13 times.
Indeed, helped by strong economic conditions in Europe and boosted further by its route-and-airport-expansion programme — a scheme that helped numbers jump 5% in February, to 8.6m customers — I am confident Ryanair’s revenues and profits should continue rising steadily long into the future.
