Is this special FTSE 250 stock primed for explosive growth to make me rich?

With tremendous growth opportunities in global travel retail, is this FTSE 250 stock set for massive gains for my portfolio?

| 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.

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully

Image source: Getty Images

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.

Special stocks with the potential to generate truly explosive returns are rare. This is especially the case with many UK shares where growth is notoriously low. But with the prospect of growing my money by as much as 65% over the next year, FTSE 250 stalwart WH Smith (LSE:SMWH) could be worth exploring.

Created with Highcharts 11.4.3WH Smith PriceZoom1M3M6MYTD1Y5Y10YALL1 Jan 202317 Sep 2023Zoom ▾Jan '23Feb '23Mar '23Apr '23May '23Jun '23Jul '23Aug '23Sep '23Jan '23Jan '23Mar '23Mar '23May '23May '23Jul '23Jul '23Sep '23Sep '23www.fool.co.uk

Travelling upwards

The first factor that makes WH Smith special is its successful diversified business model. The company has stores in a variety of areas that include high streets, travel locations, and online channels. This provides resilience and multiple avenues for growth.

The firm recently reported a 28% jump in annual revenues. This was led by a 42% surge in its high-growth global travel division. That’s because the retailer’s travel stores have benefited tremendously from the ongoing recovery in airport passenger volumes. This shows that despite its wavering high street presence, WH Smith has the potential to stage a comeback akin to the likes of Marks and Spencer.

Should you invest £1,000 in Games Workshop right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Games Workshop made the list?

See the 6 stocks

Looking ahead, WH Smith plans to open over 80 new stores globally in the coming year. The board has made its intentions clear that it wants to capitalise on the robust travel rebound. This is a smart strategy as passenger traffic continues to recover to its pre-pandemic levels. Provided this momentum can be sustained, WH Smith could potentially achieve 20%-30% annual earnings growth in the years to come.

This level of rapid expansion and increased profitability could serve as a powerful catalyst to send its share price soaring. After all, analysts are pricing in an annual growth rate of approximately 28%.

Expensive shopping spree?

The consensus price target currently indicates that the shares could rise by as much as 65% over the next year. The average price target of £19.10 implies the market has yet to fully account for WH Smith’s growth.

So, if profits wind up exceeding expectations as global travel recovers, this stock’s valuation multiples could be justified as it currently trades at a relatively hefty price-to-earnings (P/E) ratio of 27.1. Nonetheless, it could be on course to do just this. The group’s premium positioning gives it a solid strategic advantage to drive sustained outperformance.

Headwinds to consider

That said, risks still exist that could stop the rise of this potentially explosive share. First is the intensifying competition in the travel retail space, which cannot be ruled out. But perhaps most notably, deteriorating consumer spending could affect its top and bottom lines if the UK economy takes a turn for the worse. This could end up becoming a double whammy as it could affect travel volumes through the airport and train/bus stations, resulting in lower volumes as well.

While challenges remain, the firm seems well prepared to weather storms relative to retail peers. Therefore, for investors seeking a special under-the-radar stock with visible catalysts to potentially generate explosive returns, I think WH Smith checks many of the right boxes.

WHSmith Share Price Forecast (17/9/2023).
Data source: Financial Times (Refinitiv)

Forecasted growth of 65% over the next year isn’t monumental. But when compared to the average return of the FTSE 100, which yields less than 10% (excluding dividends), this figure is rather considerable. If I invested £20,000 today, a 65% gain would generate a return of £13,000 in a year! On that basis, I’m eyeing WH Smith shares for my next purchase.

Should you buy Games Workshop shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

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.

John Choong has positions in Marks And Spencer Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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 Growth Shares

Rolls-Royce's Pearl 10X engine series
Investing Articles

Is there no limit to how high Rolls-Royce shares might go?

Christopher Ruane sees some reasons Rolls-Royce shares could continue pushing upwards. But is he persuaded enough about the potential value…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

How much could £20k in a Stocks and Shares ISA be worth in 2030?

UK investors have enjoyed spectacular returns in their Stocks and Shares ISA's over the past five years. Would could the…

Read more »

piggy bank, searching with binoculars
Investing Articles

Here’s the growth forecasts for International Consolidated Airlines (IAG) shares through to 2028!

Shares of International Consolidated Airlines (LSE: IAG) have risen following a strong set of first-quarter financials last week. Is the…

Read more »

Nottingham Giltbrook Exterior
Investing Articles

2 stocks to consider after the Marks & Spencer cyberattack

Hacking is on the rise and is being fuelled by artificial intelligence. Here are two stocks to consider from the…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

I’m trying to follow Warren Buffett’s advice with this FTSE 100 stock

As Warren Buffett steps aside at Berkshire Hathaway, Stephen Wright is thinking about how to put his investing principles into…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

2 shares to consider as a new US deal could revive the UK stock market

Our writer investigates two major FTSE 100 shares that could enjoy a boost following a US tariff shift and possible…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

This FTSE 250 growth trust just loaded up on these 2 top S&P 500 stocks

Our writer noticed that this FTSE 250 investment trust has just scooped up a couple of quality US growth stocks.…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

This world-class FTSE 100 company’s expecting up to 10% growth in 2025

This is one of the most profitable companies in the FTSE 100 index. And right now, it’s firing on all…

Read more »