LONDON -- If you think FTSE 100 blue chips are too boring and small caps are too risky, then you might like to take a look at mid caps.
Shares across different sectors and market-cap ranges fall in and out of favor with the market. That's why we prepared a special report -- "Top Sectors of 2012" -- to highlight three attractive industries for 2012. This free report will be dispatched immediately to your inbox.
I trawled the FTSE 250 to find the 12 companies that had increased their earnings per share fastest over the last five years. I then removed companies that were not expected to increase EPS by more than 10% in the coming year.
|
Company |
EPS 5-Year CAGR % |
Price (Pence) |
Market Cap (Millions of Pounds) |
|---|---|---|---|
| Centamin | 74.1 | 70 | 761.6 |
| Oxford Instruments | 59.5 | 1,280 | 688.1 |
| Rightmove (LSE: RMV.L) | 40.8 | 1,620 | 1712 |
| Petropavlovsk | 28.5 | 472 | 849.7 |
| Restaurant Group | 25.9 | 303 | 596.6 |
| Senior | 25.2 | 192 | 754.6 |
| Domino's Pizza (LSE: DOM.L) | 24.3 | 518 | 835 |
| Chemring | 23.5 | 276 | 531.7 |
| SOCO International (LSE: SIA.L) | 23.2 | 310 | 976.5 |
| Yule Catto (LSE: YULC.L) | 23.1 | 144 | 456.1 |
| Rotork | 20.7 | 2,000 | 1705 |
| Dialight | 20.5 | 1,040 | 331.3 |
Four shares caught my eye:
1. SOCO International
SOCO's growth in the last five years has come from the development of an oil discovery in Vietnam.
The company is no longer an explorer spending money drilling for oil -- it is also now a producer selling it. In 2011, SOCO made an average of $113 for each barrel sold versus just $84 in 2010. By the end of 2011, SOCO's entitlements from exploration reached 14,600 barrels per day, versus just 2,600 the year before. Most of the profit uplift came from the massive increase in production, which is expected to increase further as operations in Vietnam are ramped up.
Yesterday, SOCO International announced the proposed purchase of a partner's minority stake in their Vietnamese operations. This would increase SOCO's share of Vietnamese production. This news led to increased speculation that SOCO might be positioning itself for a takeover.
SOCO has long been a popular share with Fools. Find out more on the company discussion board here.
2. Rightmove
Rightmove is the market-leading home-search website. The company has flourished by providing a range of online services to estate agents across the U.K.
Between 2006 and 2011, Rightmove increased net profits tenfold. In that time, Rightmove's dividend has increased from 4.5 pence per share to 18 pence.
Rightmove is not just a historic growth story. Analyst consensus is for another 33.7% increase in EPS for 2012, followed by a 15.1% increase in 2013. The dividend is forecast to continue rising on a similar trajectory.
Rightmove is great example of how the Internet can disrupt an industry. Before Rightmove's rise, the most important advertising media for estate agents was local newspapers. Now, housebuyers look on the Internet to find a new property.
More growth has come from the premium services Rightmove offers agents that wish to promote their properties with maximum impact. The company's mobile apps have further revolutionized home search. The demand for these new initiatives will be integral to Rightmove's cementing its dominant position.
3. Domino's Pizza
Domino's is the U.K. and Ireland operations of the world-leading pizza brand. Domino's outlets are franchised operations.
Domino's is a classic example of a rollout story. Once a retail business can prove itself in one location, massive growth can be achieved by "rolling out" across more sites.
At the end of 2006, Domino's had 407 stores in the U.K. and Ireland. By the end of 2011, the number reached 726. Growing demand for Domino's pizzas has seen turnover increase from 95 million pounds to 210 million pounds in those five years. In that time, profits have increased threefold as economies of scale have driven margins higher. The shareholder dividend has increased from 3.1 pence to 12.3 pence as Domino's matured.
It would appear that Domino's growth is not over. A 19.8% increase in EPS is forecasted for 2012, followed by another 14.4% increase in 2013. Though Domino's is clearly a great company, the shares are no bargain. Using the 2012 consensus forecasts, the shares trade on a forward price-to-earnings (P/E) ratio of 23.9, giving a prospective dividend yield of just 2.7%.
4. Yule Catto
Yule Catto is a specialist polymers business. The company sells products that find their way into adhesives, floor coverings, and gloves.
At the end of June, the company issued a trading statement that saw the shares lose almost one-quarter of their value. Yule Catto reported weak economic conditions in Europe and adverse currency movements. This means the company will not be making the anticipated level of profit for the year. Still, Yule Catto does expect underlying profit to show progress on last year's numbers.
This follows a five-year period in which EPS has increased nearly threefold as sales doubled. After being cut entirely in 2009, the dividend was restored the next year and has progressed significantly since.
Today, the shares trade on a P/E of just 6.4 times 2011 profits. Although growth has stumbled recently, the shares look worthy of further research.
Those are 12 shares that our author discovered using a statistical filter. If you prefer to use a human filter instead ,then you might learn something from top fund manager Neil Woodford. Some of his favorite blue chips are revealed here in this free Motley Fool report -- "8 Shares Held by Britain's Super Investor."
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