The UK's fastest growing variety retailer B&M European Value Retail(LSE: BME) is one of my favourite stocks at the moment. While famous names have been disappearing from the high street, FTSE 250-listed B&M has been busy spreading its wings and expanding the number of stores it operates all around the country. Investors can either choose to be snobbish and ignore the discount revolution, or accept that this is most certainly a growth area.
Unfortunately, it's not possible to buy shares in Aldi or Lidl, not because they're German, but because they're privately owned and not publicly traded. Shame. Earlier this year Poundland was bought by South African holding company Steinhoff International, so it's also off the table. And up until a couple of years ago you couldn't buy shares in B&M either, but now you can snap them up at less than their June 2014 initial public offering (IPO) price of 270p.
B&M looks good value
The shares did well initially, soaring to 358p last summer, but then the valuation started to look very demanding at 30 times earnings for FY2015. Investors who decided to take profits were proven right when the shares began their descent to today's levels of around 235p. In my view the sell-off isn't justified as B&M will soon grow into its lofty valuation and prove to the market that it can still demonstrate strong growth even after the rapid expansion of the last few years. The company's revenues surpassed £2bn for the last financial year while underlying earnings increased by a healthy 26%.
There's plenty more to come from B&M as the company aims to increase the number of UK stores from 511 to 850, with further openings in Germany too. City analysts are projecting 10% earnings growth this year, with an even better 11% improvement pencilled-in for next year, leaving the once-expensive shares trading at a very agreeable 15 times earnings for FY2018. I'm expecting more consumers will turn to B&M once the effects of Brexit start to bite, and investors might want to do the same.
Grab a slice of Just Eat
Online food delivery service Just Eat(LSE: JE) last week upgraded its guidance for the full year after reporting a strong third quarter. The mid-cap firm lifted guidance for full-year revenues from £368m to £371m after it revealed total orders for the three months to the end of September had grown to 33.3m, a 34% rise on the previous year on both a reported and like-for-like basis.
Just Eat has been investing in a number of technology and marketing initiatives and is beginning to see the benefits in many of its markets as it continues to grow both organically and through worldwide acquisitions. The valuation might look excessive at 50 times earnings for the full year, but this falls to a more palatable 33 times earnings by the end of 2017. I think Just East has plenty more growth potential, particularly abroad, and should easily grow into its lofty valuation in the coming years.
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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.