Key points
- Games Workshop Group has a compound annual EPS growth rate of 31.4%
- Paragon Banking Group’s dividend increased to 26.1p per share for 2021, up from 14.4p the year before
- Both companies exhibited strong revenue growth between 2017 and 2021
The recent market sell-off has extended to the share prices of most companies. While many investors panicked and immediately sold shares out of fear, I’ve been holding tight and scouring the FTSE 250 index for high-quality growth stocks. I think I’ve found two firms that fit the bill, based on their revenue and earnings per share (EPS) record. Why am I adding them to my portfolio? Let’s take a closer look.
A FTSE 250 games manufacturer
Games Workshop Group (LSE:GAW) is a UK-based manufacturer of miniature figures and games. From my analysis, this is a company that has been growing consistently.
For the years ended June, the business increased revenue from £158m in 2017 to £353m in 2021. Furthermore, its EPS rose over the same period from 95.1p to 372.7p. By my calculation, this results in a compound annual EPS growth rate of 31.4%. As a potential investor, I find this incredibly attractive. That said, past performance is not necessarily a reliable indicator of future performance.
In addition, a trading update for the six months to 28 November 2021 showed that sales improved slightly. On the other hand, pre-tax profits dipped to £86m from £91.6m during the same period in 2020. This can partially be explained, however, by the excessive demand for games during the lockdowns of the Covid-19 pandemic.
A solid banking group
The second company, Paragon Banking Group (LSE:PAG), is a banking firm specialising in mortgages and commercial lending. It has also seen its EPS grow over the 2017 to 2021 calendar years, from 43.3p to 65.2p. This results in a compound annual EPS growth rate of 8.5% While this is not as high as Games Workshop, it still constitutes consistent growth.
In a trading update for the three months to 31 December 2021, however, the business confirmed that 2022 full-year guidance remained unchanged. The company therefore still believes that Covid-19 could pose a risk to its operations, despite positive results.
On the other hand, revenue increased between the 2017 and 2021 calendar years from £252m to £324m. In addition, the annual results for the 2021 calendar year stated that the dividend would increase to 26.1p per share, up from 14.4p in 2020. This is attractive to me as a passive income investor. It also announced a £50m share buyback scheme, another sign the company is in a healthy state.
I like both of these firms because of the fact they exhibit consistent growth over a period of time. Buying shares in each is a good way for me to respond to the current market sell-off, because they could provide long-term growth. I will be purchasing shares in both businesses without delay.
Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended Games Workshop. 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.
