When it comes to growth stocks, two companies in the FTSE 250 stand out to me right now. The first of these market-leading businesses is TV and film production firm Entertainment One (LSE: ETO).
The producer and owner of the now-world-famous Peppa Pig brand, Entertainment One has gone from strength to strength over the past five years. Since 2013, adjusted earnings per share have nearly doubled, rising from just 13.1p in 2013 to 25p for the fiscal year ended 31 March 2019, smashing City growth projections, (analysts had pencilled in adjusted earnings per share of 24.2 for 2019).
Fiscal 2019 was a particularly impressive year of growth at the firm. According to Entertainment One’s full-year release, underlying group earnings before interest, tax, depreciation and amortisation (EBITDA) rose 21% during the 12 months to the end of March, “driven by strong growth in Family & Brands and higher margins in Film, Television & Music.“
On top of this, the group’s EBITDA margin for the period increased 5.1% to 21%. All of the above combined to help management report a 30% year-on-year increase in earnings per share for the year.
And it doesn’t look as if this production powerhouse is going to slow down any time soon. It recently sealed the acquisition of Audio Network, which it describes as “one of the world’s largest independent creators and publishers of original, high-quality music for use in film, television, advertising and digital media.“
Management believes this business will help the group expand its existing music division as well as bringing “high margin, recurring revenues and significant cash generation to the group.”
Considering all of the above, I reckon Entertainment One will smash the City’s growth targets for the company over the next 12 months. Analysts have pencilled in earnings growth of 13.6% to 27.5p for fiscal 2020. But after growth of 30% in 2019, this seems to me to be understating the firm’s potential. With that being the case, I think shares in the global entertainment business might be worth snapping up for your portfolio today.
Long term potential
Another FTSE 250 growth stock that’s recently caught my eye is wealth management business Quilter (LSE: QLT). There’s lots to like about this enterprise, in my opinion.
Formerly Old Mutual Wealth Management Ltd, Quilter is one of the UK’s largest wealth managers and a great way to play the rising demand for long-term savings and pension management.
Indeed, clients seem to be flocking to the group’s offering. It recently reported that net client cash flow, the difference between money received from and returned to customers for the year to the end of December, hit £4.7bn, growth of 5% during the reported period.
This inflow is all the more impressive considering the volatility that dogged global markets towards the end of 2018. Despite these inflows, thanks to market volatility, assets under management declined by 4% over the year.
Still, despite this setback, I believe Quilter is well-placed for growth over the long-term. Analysts are expecting earnings growth of nearly 8% this year and 15% in 2020, putting the stock on a forward P/E of just 12.
That’s not a bad price to pay for a business with earnings growing at a double-digit rate. Income seekers can also look forward to a 3.6% dividend yield.
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Rupert Hargreaves owns no share mentioned. 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.
Motley Fool UK 2019