Report by Willis Welby

Willis Welby screens UK large-cap growth stocks using their proprietary expectations-analysis approach, assessing share-price-implied margins and returns against consensus forecasts. Their latest screen covers companies above US$4bn m/cap, with consensus Y3 revenue growth above 6%, positive Y3 EBIT margins, attractive Y3 IROCE and implied-to-Y3 EBITM ratios below 110. Twelve stocks make the screen. Among aerospace names, BAE has the clearer defence-spending story, but Melrose looks more forgotten, with an implied-to-Y3 EBITM ratio of just 27, leaving scope for the shares to more than double. Compass remains a strong all-round compounder, while investment in new products has driven good underlying results at ConvaTec, which still offers 60%+ upside. Willis Welby also revisits AI-jeopardy stocks RELX and Experian: despite barrier-to-entry concerns, both are currently benefiting from AI through stronger revenue growth and higher margins and may now be very cheap.

Consumer Discretionary / Industrials

Report by Willis Welby

Willis Welby looks at UK growth names (>$2.5bn M/Cap) that have not shared in the share price rises since Oct 26th. CPG has seen analyst downgrades despite a robust update during Nov, but looks like a very strong compounding story that is not expensive and makes great sense at current prices. However, it is BAE that really stands out. The defence contractor has seen upgrades to consensus Y2 EBIT over the last three months and more recently has announced more good news on orders. Relative to US peers that implied to Y3 EBITM ratio of <60 looks way too low. Other stocks discussed in their report include AstraZeneca and Games Workshop.