My top 3 FTSE 250 growth shares for 2020

These FTSE 250 growth shares look set to take off in 2020 writes Rupert Hargreaves.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As one of the UK’s top up-and-coming wealth managers, Brewin Dolphin Holdings (LSE: BRW) has a tremendous opportunity in front of it.

The demand for wealth management services across the UK, and indeed around the rest of the world, is only growing as investors and savers wake up to the value wealth managers can add to any investment strategy.

Growth ahead

According to research from PWC, the industry’s penetration rate (managed assets, as a proportion of total assets) will expand from 39.6% in 2016 to 42.1% by 2025.

With this being the case, if Brewin can keep doing what it has been doing for the past five years, I think the stock offers the potential for substantial capital gains in the years ahead.

Over the past five years, Brewin’s net profit has grown at a compound annual rate of 50%, and City analysts expect the company to report earnings growth of 29% in its current financial year and an increase of 10% for 2020.

That puts the stock on a forward P/E of 15, in line with the asset management industry sector average. In addition to the company’s growth potential, shares in the wealth manager currently support a highly attractive dividend yield of 4.7%. Put simply, there’s a lot to like about this investment.

Booming market

I’m also optimistic on the outlook for Wizz Air (LSE: WIZZ). Wizz is one of London’s most successful companies. Net profit has grown at an average of 27% per annum for the past six years and the stock has more than doubled investors’ money over the previous three. 

As the market for low-cost air travel continues to boom, Wizz has the backdrop it needs to maintain its explosive growth rate. To capitalise on customers insatiable demand for cheap air travel, Wizz is planning to nearly triple the size of its fleet and go intercontinental by 2028. The firm has 270 planes on order at the moment with more in the pipeline.

City analysts are expecting Wizz to report earnings growth of 19% this year, followed by an increase of 24% in 2021 as new planes arrive and the company opens up new routes.

A forward P/E of just 13.3 seems to undervalue the company, considering management’s long-term growth plans.

Property growth

Another company that has an excellent growth track record is student accommodation manager Unite (LSE: UTG).

Unite has managed to make the slow and steady business of managing student accommodation exciting. Over the past six years, earnings per share have grown at a compound annual rate of 15%, and book value per share has increased at 17% as Unite has reinvested rental profits back into operations to fund the development of new buildings. Over the same time frame, the company’s dividend to investors has grown tenfold.

Considering this track record, I’m excited to see what the future holds for Unite. Demand for high-quality student accommodation across the UK is only growing, and the firm’s size gives it a key advantage in this booming market.

City analysts seem to be expecting big things as well. They are expecting the company’s full-year 2019 dividend to leap a staggering 31% thanks to growth in rental income. A further increase of 19% is projected for 2020. 

If the company makes good on these projections, I think there’s plenty of potential for capital growth here as income investors rush to take advantage of Unite’s growing distribution. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »