These 2 exciting growth stocks have further to go

The Motley Fool

The UK property market continues to throw up some exciting growth opportunities, and the following FTSE 250 companies could prove tempting building blocks for your portfolio.

Urban vibe

Specialist regeneration and property developer U+I Group(LSE: UAI) manages a £6bn portfolio of mixed-use urban regeneration projects in London, Manchester and Dublin. The residential property market may be wobbling at the moment but right now U+I = growth, its share price up 16% in three months. The company is bristling with potential.

It is a company with a social dimension too as it aims to transform "undervalued" parts of towns and cities into thriving communities. Full-year results published in April showed four new large-scale Public Private Partnership wins, adding £1.5bn of gross development value to the company's portfolio.

Do your sums

The group was recently appointed to run the £850m Mayfield Depot redevelopment in Manchester, building on earlier high-profile successes include Paddington Central, The Old Vinyl Factory and The Deptford Project in London. Mixed-use urban regeneration is the big thing these days and U+I has shown flair and imagination. But should you invest in it?

Investors cannot expect a smooth ride from a company valued at just £236m and working on a small number of large projects. Erratic revenues mean that earnings per share (EPS) fell a whopping 61% in the year to 28 February 2017, but are then forecast to rise 246%, before going on to slump 37%.

However, there is plenty to tempt. Management reckons it is on track to deliver a 12% post-tax total annual return in the next three years. Today's valuation of 28 times earnings is forecast to plunge to just eight times, while the 3.1% dividend yield is expected to hit 6.3%, then 8.2%, over the next couple of years. There is an opportunity here, if you thinks U+I's sums add up.

Country squires

Residential developer and regeneration partner Countryside Properties(LSE: CSP) aims to build homes of "character and quality" across the UK, and its recent share price performance has demonstrated both of those attributes, rising more than 40% in the last three months alone. This £1.47bn company is a much larger entity than U+I and should offer more stable returns, although with Nationwide showing house prices falling for three consecutive months, and housing analysts warning of resurgent negative equity, nothing is certain.

Countryside's recent impressive half-year results showed housing completions up 31% to 1,437, and adjusted operating profits up 39% to £70.4m. Its partnerships division, which works with local authorities and housing associations, posted a particularly strong performance, with adjusted operating profit up 66% to £38.5m. Management's decision to focus on the middle of the private housing market appears to be paying off as well, amid signs the top end is slowing fastest right now.

Home front

The company enters the second half of the year with 81 operational sites and a record private forward order book. City analysts are optimistic, pencilling-in rapid EPS growth of 66% in the year to 30 September, followed by another 27% next time. This should trim today's valuation of 20.21 times earnings to around 12.1, while the yield is expected to climb to 3.2% in the next couple of years. The only thing that can stop Countryside now is a house price crash.

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Harvey Jones has no position in any shares 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.