£2,000 to invest? This FTSE 250 stock has turned £2,000 into £11,000 in 10 years
Today, I’m looking at two companies that could be a great place to stash your cash.
First up, is pizza delivery business Domino’s (LSE: DOM). What I like about this company is that over the past decade, it has achieved outstanding returns for investors. £2,000 invested in the business 10 years ago, would be worth £11,300 today, that’s a compound annual return of 18.1%.
And I reckon the company’s best days are in front of it as it shifts more and more pizza around the UK.
Earnings growth
For 2017, Domino’s reported revenues of £474m. Analysts expect sales to hit £564m in 2018 before rising to £611m in 2019. Over the same period, net profit and earnings per share (EPS) are expected to increase by 28% and 38% respectively.
However, despite this bright outlook. Shares in the pizza group have slumped over the past three months. From a high of just under 380p at the beginning of June, the stock is now changing hands for just under 280p. What’s interesting is that investors have been selling even though the City has turned more positive on the outlook for the business. The average analyst EPS estimate for 2018 has increased by around 3% since the beginning of the year, but it seems investors are not paying attention.
For savvy value hunters, this is good news. At the time of writing shares in Domino’s are trading at a forward P/E of just 17.1. This might seem expensive, but over the past five years, the stock has rarely changed hands for less than 20 times earnings.
So, right now it looks as if shares in Domino’s are at sale prices. Considering the company’s historical performance, and its future potential, I reckon it might be sensible to make the most of this opportunity. There is also a dividend yield of 3.5% on offer.
Bouncing back
Greggs(LSE: GRG) is another market-beating FTSE 250 growth stock that has recently grabbed my attention.
Over the past five years, shares in the high street bakery have returned more than 20% per annum. However, the company’s growth came to a shuddering halt earlier this year when management issued a profit warning following the bad weather in March and April.
The good news is, a few months after issuing the warning, Greggs announced a 5% increase in sales for the first six months of 2018 and told investors that profits for the year would match 2017, a small improvement on the earlier forecast.
Still, while the company’s underlying performance has improved, investors have been slow to return. Year-to-date, the stock remains down around 22%.
Just like Domino’s, I believe now could be an excellent time to make the most of the market’s ambivalence towards the business and take a bite out of Greggs.
Trading at a forward P/E of 17 the stock isn’t cheap, (even compared to its historic average) but when you take into account the group’s dominance of the UK high street, fat return on capital and plans to open another 600 shops over the next two years, I think this is a price worth paying. A dividend yield of 3.1% also sweetens the deal.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Domino's Pizza. 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.
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