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Year’s of underperformance mean the FTSE 250 is stacked with top growth shares at rock-bottom prices. Here just one I think savvy investors should consider buying today.
30%+ earnings growth
Forterra‘s (LSE:FORT) forward price-to-earnings (P/E) ratio is 18.7 times. This may not look especially attractive from a value perspective. But as I’ll explain, this reading is expected to topple over the next few years, with brokers predicting that profits will take off:
| Year | Expected annual earnings growth |
|---|---|
| 2025 | 31% |
| 2026 | 37% |
| 2027 | 34% |
This FTSE 250 company is the UK’s second-largest brick manufacturer by volume. Its sales and profits dropped in recent years as higher interest rates have dampened new home sales.
But earnings are tipped to rebound strongly from 2025 as the Bank of England steadily eases rates and a mortgage market war benefits buyers. In fact, Forterra believes that “brick consumption has the potential to grow at a faster rate than housing completions in the short-term“, given that demand has fallen more sharply than completions in recent years, meaning builders’ stock levels are unusually low.
Sales surging
Latest trading news in May underlined the brickmaker’s enormous near-term growth potential. It said sales were up 22% in the four months to April, the business commenting that “a strong performance in both our Bricks and Blocks and Bespoke Products operating segments“.
The business has invested heavily in three factories to capitalise on the improving housing market and diversify its market offering, too. Its Accrington plant can produce 48m lightweight brick slips per year, targeting the modular construction sector where construction speed and sustainability are key priorities.
It’s also spent £95m to reduce costs and double capacity at its Desford brick factory, to 180m bricks per year. That’s enough to build 24,000 average family homes, the company claims, and puts it in great shape to capitalise on the new housebuilding boom.
Current government plans are for 1.5m new homes to be built in the five years to 2029.
A FTSE 250 bargain?
As I said at the top, current City projections pull Forterra’s forward P/E ratios sharply lower over the next three years. From 18.7 times this year, its multiples plummet to 13.6 times for 2026 and again to 10.2 times.
This is not all that’s caught my eye as a keen value investor. For 2025, 2026, and 2027, its P/E-to-growth (PEG) ratios are 0.6, 0.4, and 0.3, respectively.
Any reading below one indicates that a share is undervalued.
A sudden inflationary uptick that influences interest rates could dent the brickmaker’s touted recovery. So could a fresh downturn in the UK economy. But, on balance, I think the company’s in great shape to deliver strong and sustained earnings growth.
If I didn’t already hold fell brickmaker Ibstock in my portfolio, I’d seriously consider snapping up some Forterra shares today.
This story originally appeared on Motley Fool
