Although the new tax year is already in full swing, I’m still digging out the best growth stocks to add to a Stocks and Shares ISA for 2024.
Today I’m looking for mid-cap stocks with long-term growth potential — those I believe will remain profitable for decades to come.
Here are two that I think have great potential in that respect.
Should you invest £1,000 in Breedon Group Plc 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 Breedon Group Plc made the list?
Beloved British food brands
Premier Foods (LSE: PFD) owns many of the nation’s favourite food brands, like Mr Kipling and Bisto. This type of brand recognition creates a powerful foundation that helps to promote stability even in a rocky economy. Just what I’m looking for.
But with inflation pushing up grocery prices lately, consumers have been looking for lower-cost alternatives to famous brands.
In response, Premier has been working hard to find ways to cut costs and direct savings towards benefitting consumers. This is one area where I feel it’s doing better than some major competitors like Unilever, which has struggled to keep costs down. However, the company is tiny by comparison and still faces tough competition from other big players in the fast-moving consumer goods industry.
One downside is that it mostly markets cakes and desserts, so sales have declined recently as consumers prioritise more critical food concerns. Fortunately, they’re likely to rise again during the holiday season. And the share price is up 361% in the past five years, representing annualised returns of 35.7%. This gives me confidence in the stock’s lasting resilience.
Looking at the firm’s financials, the price-to-earnings (P/E) ratio, at 14.7, is on par with the industry average of 15. This suggests there may be limited room for the price to grow further from here in the short term. But earnings per share (EPS) have grown at a rate of 39% for the past three years, backing up my thesis of long-term profitability.
A major player in construction
Based in Leicestershire, Breedon Group (LSE: BREE) is a major supplier of construction materials to the UK building industry. This is typically a stable and reliable industry to be in and the company is a dominant player.
In May 2023, it undertook a share consolidation at a ratio of five to one, so it’s difficult to gauge past price performance accurately. However, the share price is up 13% following the consolidation almost a year ago. And at £3.82, it’s estimated to be trading at 44% below fair value using a discounted cash flow model.
With a debt-to-equity ratio of 22.4% and 20 times interest rate coverage, it has a solid balance sheet with no apparent concerns. Another bonus is the 3.5% dividend yield that’s well-covered by earnings.
However, it’s heavily reliant on a strong economy that maintains a demand for new housing and buildings. The current economic climate remains questionable and a downturn could hit Breedon’s bottom line hard. But with little debt and a strong brand, I believe it could weather such a storm and the share price would recover in the long term.
Overall, I’m confident these both represent good defensive stocks which I’d strongly consider buying today if I had the spare cash. While they may briefly ebb and flow in line with the wobbly economy, I believe their long-term growth prospects are solid and they’d both make a great addition to an ISA.
