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.
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.
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.
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.
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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.
Motley Fool UK 2020