Why I'd shun falling knife UK Oil & Gas Investments plc for this growth star

The market likes today's full-year results from Hollywood Bowl Group(LSE: BOWL) and the shares are up almost 8% as I write. The numbers are good. Revenue rose almost 9% compared to a year ago with like-for-like sales up an encouraging 3.5%, suggesting the firm's offering is hitting the spot for customers.

The firm is making money and earnings are rising. Net cash from operations increased more than 16% and adjusted underlying earnings after tax rose 30%, but adjusted diluted earnings per share eased by 8% due to an increased share count. The directors underlined the progress by declaring the first-time appearance of a meaningful full-year dividend that produces a yield a little over 1.9%, and a special dividend taking the yield up to more than 3.5% at today's share price around 205p.

Strong growth

One of the things I like about the company is its narrow focus operating as the UK's largest ten-pin bowling provider with 58 bowling centres across the UK under the Hollywood Bowl, AMF and Bowlplex brands. I reckon firms that specialise stand a better chance of doing things well than those that try to diversify their operations.

As well as rolling out its refurbishment and rebranding programme, the company opened three new centres during the period, which it says are performing "strongly." Since the end of the trading year a fourth centre opened, suggesting that 2018 will be another good year for growth. Chief executive Stephen Burns reckons the rebrands and refurbishments "have delivered significant returns," and he says new centres opened in the year "have performed ahead of expectations."

There's a "healthy" pipeline of new sites to feed ongoing expansion and the firm has plans to grow with "selective new openings and acquisitions." One of the great things about the business is its healthy cash inflow. Customers pay before using the service so the firm gets to reinvest this flow of cash straight away. To me, the growth proposition with Hollywood Bowl looks robust and I'm more likely to buy some of the firm's shares than I am those of UK Oil & Gas Investments(LSE: UKOG), for example.

Big potential

The oil and gas exploration firm is onshore UK-focused and raised £16.5m during 2017 to fund its four-well drilling and testing programme for 2018. With key regulatory permits already in place, the aim is to further appraise "the wider Kimmeridge continuous oil deposit plus the Horse Hill Portland oil discovery." The directors' lofty ambition is to provide stable commercial production and cash flow by early 2019. They reckon a positive outcome would give the company a solid base for further drilling and development of the "significant untapped Kimmeridge resource-base," which underlies the firm's extensive licence interests.

But as with all oil exploration, nothing is certain and there's no guarantee that significant cash inflows will result. That's one reason why investors have endured such a wild ride. The share price went as high as 9p in September but is near 3.5p today, and falling. Speculation drives these wild swings, but I reckon we'll see less of that with Hollywood Bowl due to its strong and consistent cash flow, so I'd rather take my chances there than with UKOG's make-or-break outcomes.

Yet there are other growth opportunities as well as these two and the Motley Fool's top analysts favour a share covered in a report called A Top Growth Share From The Motley Fool.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. 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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