Imperial Brands plc isn't the growth bargain I'd buy today

I was a big fan of Imperial Brands (LSE: IMB) in previous years. I liked the brilliant earnings visibility created by the defensive nature of its operations, not to mention the universal popularity of brands like West and Gauloises. Helped by improved investment in marketing, these self-styled Growth Brands continue to gain market share in most of their markets, with aggregated share rising 80 basis points in the year ending September. The strength of these brands is helping the firm overcome the broader demand decline for traditional, combustible products, at least for now.

I was also encouraged by the Footsie company embracing new technologies to generate long-term earnings. Grabbing the headlines is Imperial Brands' foray into the e-cigarette market through its blu technology, although it has also experimented in other fast-growing areas like caffeine strips. And the company has big plans in 2018 to develop the tech still further

Risks rising

But the relentless attack on so-called Big Tobacco by legislators across the globe encouraged me to sell up. More recently the US Food and Drug Administration has concocted plans to reduce the amount of nicotine in cigarettes to cut addiction, a move which could slash revenues from one of the world's largest markets. In this environment I am concerned that revenues at Imperial Brands can only defy gravity for so long.

And vaping is now in the headlights too, with everything from restrictions on product sales and marketing through to curbs on public usage also being touted in some markets.

Nonetheless, the City is expecting Imperial Brands to keep its long record of earnings growth going with a 2% rise in fiscal 2018, a projection that creates a dirt-cheap forward P/E ratio of 11.3 times. And this prediction is anticipated to underpin a 188.1p per share dividend, resulting in a monster 6.1% yield.

However, a worsening trading backcloth has seen brokers take the red pen to their earnings forecasts in recent months, and it is not hard to envisage further downgrades coming down the line. Imperial Brands no longer appears the dependable profits generator of yesteryear so I for one will be staying away right now.

Stunning growth on the cards

In fact, I would be much more content to plough my investment cash into Tricorn Group(LSE: TCN) today.

I last lauded the pipe-maker's investment case in September, and latest bubbly trading details released on Wednesday have reinforced my bullish take. With market conditions on the up, it saw revenues boom 28.4% during the six months to September, to £11.4m, a result that pushed pre-tax profit to £370,000 from £4,000 a year earlier.

And I am confident the vast amounts the company is investing in its global footprint should keep sales tearing higher. The business has already spent a fortune bulking up its presence in the UK, the US and China in recent years.

Unsurprisingly the number crunchers expect earnings expansion at Tricorn to tear ahead of that expected over at Imperial Brands. In the 12 months to March 2018 a 164% bottom-line advance is predicted, and rampant growth is not expected to be a flash in the pan, either, a 53% increase also anticipated for fiscal 2019.

Such forecasts make the AIM-listed business a phenomenal value pick, Tricorn rocking up with a prospective P/E multiple of just 12.1 times and a sub-1 PEG readout of 0.1.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.