The London Stock Exchange is bursting with exciting opportunities to invest in companies that offer both value and growth. Having looked at LSE shares for a while, I think I’ve found two firms that could be great additions to my portfolio. Halfords (LSE:HFD) has demonstrated growth over a difficult pandemic period, while Restaurant Group (LSE:RTN) may benefit from the recovery from Covid-19. What other reasons attract me to these businesses? Let’s take a closer look.
A rebounding LSE share
The first company, Halfords, is a retailer and specialist in automotive, motorbike, and cycling products. It currently trades at 257p, down 37% in the past year. For the years ended April, between 2017 and 2021, results have been mixed.
While revenue increased from £1.1bn to £1.3bn, profit before tax declined from £71.4m to £64.5m. This may be partially due to the impact of the pandemic on profit margins.
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For 2020, the company reported a profit before tax of just £19.4m. It is encouraging to see such a quick rebound in more recent financial results.
On the flip side, earnings-per-share (EPS) rose from 30.3p to 41.7p. By my calculations, this means that the firm has a compound annual EPS growth rate of 6.6%. This is both strong and consistent.
It should be noted, however, that past performance is not necessarily indicative of future performance.
The business also lifted profit expectations for full-year results in April 2022 due to accelerating growth in the automotive and motorbikes segments. However, it has also warned about the potential impact of ongoing supply chain issues.
A pandemic recovery stock
The second company I’m thinking of buying for long-term growth is Restaurant Group. It owns well-known food outlets in the UK, like Wagamama and Frankie & Benny’s. The firm endured a torrid time during Covid-19, swinging to a £133m loss in 2020.
Although the business still recorded an £8m loss for 2021, this was a vast improvement in a relatively short period of time.
What’s more, just about all domestic restrictions have been removed in the UK, paving the way for more consistent footfall in restaurants. It is worth noting, however, that any future variant could halt progress.
This more positive operating environment has been reflected in net debt levels. This figure stood at £340m in 2020. By 2021, this had nearly halved to just £171m.
Investment bank Berenberg increased its target price from 110p to 125p because of Restaurant Group’s scope to grow earnings. It currently trades at 65.85p, down 46% in the past year.
Overall, these two businesses have rebounded well after the pandemic. On a stronger financial footing, future operational environments look to be much more stable. I will be buying shares in both businesses soon and holding them for long-term growth.
