Markets have on the whole been moving sideways since the start of the year. The FTSE 100 has been more or less flat over the last six months (down by 0.1% to be exact). But UK business confidence is reportedly at its highest since 1992 and the Office for National Statistics has just reported that Britain’s economic output is above its pre-recession peak. So Andy Murray is going to win Wimbledon and everything is going to be fine!
Economic recovery drives stocks onto growth screens
The pickup in economic activity is helping shares qualify for Stockopedia’s Growth Screens. A key driver of Britain’s recent economic growth has been the recovery in the housing market. This trend helped Topp Tiles (TPT) - a distributor of ceramic tiles - grow earnings each year since 2012. Furthermore, the company has a moderate historic PE ratio (17) despite the fact that earnings are expected to grow by another 43% in the twelve months to September 2014. This helped the company qualify for the Naked Trader Screen on 20 June and takes the number of Growth Screens that TPT qualifies for up to two. It also qualifies for the popular Zulu Principle Screen.
Wincanton (WIN) - which was mentioned in last week’s StockRank Column - this week qualified for the Zulu Principle Screen. The company is engaged in the cyclical logistics industry and could grow profits if clients like Argos and WH Smith benefit from increased consumer spending. Accordingly, brokers predict that earnings could grow by 37% in the twelve months to March 2015. Against a forward P/E ratio of 8.3, Wincanton would have a rolling PEG of 0.4 (not to mention a solid ROCE - 60%).
Is Renew Holding the Magic Formula?
On 19 June, Renew Holdings (RNWH) - qualified for our version of Greenblatt’s Magic Formula Screen, which aims to filter for companies that are both ‘good’ (having a high Return on Capital) and ‘cheap’ (with a high Earnings Yield). The company operates in the highly regulated infrastructure maintenance business. It is therefore well placed to command a Return on Capital (98%) that ranks 120th in the British universe of stocks. Renew Holdings also has an Earnings Yield (9.4%) that ranks 314th in the UK.
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