Every month, we ask our freelance writer investors to share their top growth stock ideas with you — here’s what they said for June!
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Airtel Africa
What it does: Airtel Africa provides telecommunications and mobile money services in sub-Saharan Africa.
By Royston Wild. Demand for telecoms services remains largely unchanged during all points of the economic cycle. Therefore, it’s my belief that Airtel Africa (LSE: AAF) could be a top growth stock for June as inflation rises and recessionary risks grow.
City analysts think Airtel’s earnings will rise 12% in the current financial year (to March 2023). They think profits growth will accelerate to 16% next year too.
And so at today’s prices, the FTSE 100 share trades on a bargain-basement forward price-to-earnings (P/E) ratio of 8.4 times.
I don’t just think Airtel’s a great buy for these uncertain times, though. Its focus on the fast-growing markets of Africa provides it with exceptional long-term revenue opportunities. Product penetration remains low across both the telecoms and financial services industries in its markets. Meanwhile, personal wealth levels are rocketing and population levels are rising strongly too.
Pre-tax profits at Airtel leapt 75.6% in the financial year to March, the latest financials this month showed. These came in at a forecast-beating $1.2bn. I expect the Footsie business to continue impressing as its customer base balloons.
Royston Wild does not own shares in Airtel Africa.
Rolls-Royce
What it does: Rolls-Royce is a multinational civil aerospace, defence, and power systems company based in the UK.
By Dylan Hood: The Rolls-Royce (LSE:RR) share price has struggled ever since the pandemic first hit. However, the firm recently announced a trading update that contained some encouraging metrics. For FY2021, gross margins increased 23.4% compared to FY2020, leaving the company profitable for the first time since the pandemic’s onset over two years ago.
The firm is also making encouraging steps in its plan to rebuild its balance sheet, and has committed to achieving positive free cash flow by Q3 of 2022.
Investors have already been reacting positively to this news, with the price of Rolls-Royce shares climbing over 6% throughout May. While still under the £1 mark, I believe now could be a great time to open a position in my portfolio for future growth.
Dylan Hood does not own shares in Rolls-Royce.
Softcat
What it does: Softcat provides IT infrastructure solutions. Its areas of expertise include cloud computing, data, and cybersecurity.
By Edward Sheldon, CFA. Softcat (LSE: SCT) shares have experienced a significant pullback since September 2021 and I think this has presented an attractive buying opportunity.
A recent trading update showed that the tech company still has plenty of momentum. Indeed, the group advised that for the quarter ended 30 April 2022, it generated double-digit year-on-year growth in revenue, gross profit, and operating profit. It added that it now expects operating profit for the full year to be “slightly ahead” of its previous expectations.
Meanwhile, after the recent pullback, the stock’s valuation now seems quite reasonable. At present, the forward-looking P/E ratio here is about 27, which is not high in my view, given the company’s track record, growth potential, high level of profitability, and strong balance sheet.
Of course, if future growth is disappointing, the stock could underperform. All things considered, however, I like SCT’s long-term risk/reward profile.
Edward Sheldon owns shares in Softcat.
Ceres Power
What it does: The Sussex-headquartered firm is a world leader in metal-supported solid oxide fuel cell technology.
By Dr. James Fox. The hydrogen industry has enormous potential and that’s why I’m keeping a close eye on Ceres Power (LSE:CWR).
The UK-based fuel cell developer is yet to turn a profit. However, revenue is growing. Ceres reported a 44% increase in revenue and other operating income in 2021, reaching £31.7m.
As such, it currently has a price-to-sales revenue of around 40. That’s not cheap, but equally this also reflects the sector’s potential.
Ceres licences its energy technology to individual manufacturers, reducing costs relating to the building of manufacturing facilities. It also has lucrative partnerships with Bosch and Doosan.
Doosan is preparing for a soft launch of its 10kW SOFC product this year and will open a 79,200sq metre plant in 2024. With production being scaled up, 2022 could be a transformative year for the firm.
And with the share price falling over the past 12 months, it looks like a good time to add this stock to my portfolio.
James Fox does not own shares in Ceres Power.
Petrofac
What it does: Petrofac designs, builds, manages and maintains oil, gas, and renewable infrastructure internationally.
By Michelle Freeman. The recent windfall tax announcement may have made headlines for the oil & gas giants like BP and Shell, but it also created an instant demand for oil & gas infrastructure services.
Why? Because the ability to offset investment spend against the new levy means that right now, plenty of UK-based projects will have been given a huge business case boost.
But getting the go-ahead is only part of the battle. They’ll also need to be able to spend the money – and that’s going to lead to a spike in demand for the next few years at least.
Petrofac (LSE:PFC) is one of a few companies that are well positioned to benefit from this upturn – alongside the wider trend globally as infrastructure spend returns with the high oil and gas prices.
The best part for me, though: it’s not a one-trick pony, having also diversified nicely with its complementary renewables infrastructure arm. Win-win!
Michelle Freeman does not own shares in Petrofac.
Howden Joinery Group
What it does: Howden Joinery is the UK’s largest vertically integrated trade kitchen supplier within the home improvement industry.
By Zaven Boyrazian. Renovating or constructing new kitchens may not sound like a lucrative investment opportunity. Yet Howden Joinery (LSE:HWDN) seems to disprove that. Looking at its latest trading update, the firm delivered an impressive 21.8% revenue growth – almost twice what it’s historically achieved. And that’s during its low season.
With its peak trading period just around the corner, the stock looks primed for a bounce-back after its recent tumble in the general market turmoil. There are valid fears of a slowdown risk due to rising inflation and a consumer spending crunch. However, given management continues to pursue its expansion plans in the UK and France, there appears to be a high degree of internal confidence that I like to see.
From what I can see, Howden Joinery is delivering its fastest growth in years, yet its share price is trading near a 52-week low. That, to me, looks like a fantastic buying opportunity for my portfolio.
Zaven Boyrazian does not own shares in Howden Joinery Group.
Hikma Pharmaceuticals
What it does: Hikma develops, manufactures and markets a wide range of high-quality generic, branded and in-licensed pharmaceutical products.
By G A Chester. Hikma Pharmaceuticals (LSE: HIK) has been out of favour for a while. Its shares are down around 30% over the last 12 months.
The latest knock to market sentiment came in May. Hikma downgraded its guidance on the expected performance of its generics division in 2022.
Management’s previous guidance was for revenue growth of 8%-10% over 2021’s revenue of $820m and an operating margin of 24%-25%.The new guidance lowered revenue to $710m-$750m and the operating margin to around 20%.
The reason was a change in expectations of the launch timing of a generic medicine, shifting its revenue and profit contribution from the second half of 2022 to the first half of 2023.
I don’t think this damages Hikma’s long-term growth story. The recent resignation of chief executive Siggi Olafsson — to pursue other opportunities — adds further uncertainty. But I reckon the weak share price represents a great opportunity for me.
G A Chester does not own shares in Hikma Pharmaceuticals
Greencore
What it does: FTSE 250 firm Greencore supplies convenience foods to retailers and food-to-go outlets all over the UK.
By Roland Head. Convenience food specialist Greencore (LSE: GNC) is bouncing back strongly from the pandemic. The firm reported sales up 34% to £771m during the half year to 25 March, thanks to “strong growth in food to go”.
I think the company’s growth is set to continue. City forecasts suggest Greencore’s pre-tax profit will hit £63.5m in the 2022 financial year and £80.6m next year.
The business is expanding beyond its historic strength in sandwiches to offer foods such as salads, sushi, ready meals and soups and sauces. Over time, I think this strategy is likely to support steady long-term growth.
Of course, larger retailers such as supermarkets are tough customers. They’re likely to keep pressure on Greencore’s prices and margins.
Today, Greencore shares trade on 12 times 2022 forecast earnings, falling to a forecast P/E of nine for 2023. That looks good value to me.
Roland Head does not own shares in Greencore.
Plus500
What it does: Plus500 provides online trading services in Contracts for Difference (CFDs) across a range of asset classes.
By Charlie Carman. Benefitting from the rise in retail trading activity over the pandemic, the Plus500 (LSE: PLUS) share price has soared nearly 90% since the start of the UK’s first lockdown in March 2020.
The FTSE 250 fintech company’s latest quarterly results revealed impressive 33% year-on-year increases in revenue and EBITDA. Admittedly, Plus500 experienced a 35% decline in active customers compared to Q1, 2021. However, average revenue per user rocketed by 104%, which sufficiently offsets any potential concerns for me.
Plus500 continues to expand its global operations. The Israel-based business recently obtained a new licence in Estonia, improving its core product offering in European markets. In addition, its acquisition of EZ Invest Securities signalled an entry into the substantial Japanese retail trading market.
It seems elevated stock market volatility is here to stay for the time being. I believe Plus500 shares should perform well in this macroeconomic environment. I’d buy in June.
Charlie Carman does not own shares in Plus500.
Dr. Martens
What it does: Dr. Martens is a luxury brand that sells footwear. Its boots are a cultural staple and its best selling item.
By John Choong – With stagnating retail sales data over the last quarter, I was originally bearish about Dr. Martens (LSE: DOCS)’ prospects. However, its stellar FY 2022 results blew my expectations out of the water. As a result, its share price surged by 18%.
Being a luxury brand, Dr. Martens has managed to pass its costs onto customers without negatively impacting its top and bottom lines. In fact, its profit margins saw an increase to 19.9% for the year, along with strong sales figures. This has pushed its free cash flow in the right direction too.
Additionally, management expects a strong FY23, citing “huge headroom for growth in key markets”, as well as a strong wholesale order book with fixed factory prices. The latter allows the firm to hedge against inflationary pressures, which is crucial given the macroeconomic environment.
Therefore, I’m optimistic about the future of the company, and will be looking to buy shares in the near future.
John Choong has no position in Dr. Martens
Wizz Air
What it does: Wizz Air is a Hungary-based airline, specialising in the operation of short-haul flights around Europe, North Africa, and the Middle East.
By Andrew Woods. The improvement in the firm’s passenger numbers in recent months is quite staggering. For May, Wizz Air (LSE:WIZZ) flew 4.1m people, with a load factor of 84.2%. This was up from 3.6m and 83.4% in April. These passenger figures for May and April also equate to 390% and 542% increases, compared to the same periods last year.
As pandemic travel restrictions are relaxed, the airline is expecting a very busy summer. It has been recruiting cabin crew at pace to try and keep up with demand, but many flights have already been cancelled. This disruption could subside once the business hires more employees.
Wizz Air recently signed a memorandum of understanding with the Saudi Arabian government to explore the potential development of routes throughout the country. This would greatly increase the company’s presence in the Middle East.
In addition, a cash balance of €1.3bn suggests that the firm is in decent financial shape and well positioned for returning to higher capacity in the coming months.
Andrew Woods does not own shares in Wizz Air.
