With house price growth slowing and interest rates forecast to rise over the medium term, the returns on buy-to-let investments may come under pressure in the coming years. As such, while the industry has proven to be lucrative in the past, its future may be less enticing from an investment perspective.
In contrast, online retailing could deliver further growth. Companies such as Boohoo (LSE: BOO) seem to be well-placed to deliver improving performance as consumers continue to switch from buying in-store to mobile transactions. Alongside another growth stock that operates in an expanding sector and which released an encouraging trading update on Monday, now could be the right time to buy Boohoo.
Improving prospects
The other company in question is video game developer Codemasters (LSE: CDM). It reported that trading in the second half of its financial year has been strong. It expects to report revenue for the 2019 financial year of £71m, while adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is due to be £18.5m.
This performance is ahead of market expectations, and follows the company’s joint development agreement with Netease, which was announced in January. The company has also experienced growth in digital channels, as well as an earlier than anticipated delivery of technology and support for the Netease project. This is expected to lead to a greater than expected portion of contracted revenue being recognised in the current year.
With the video games industry continuing to grow at a rapid pace, Codemasters could be well-placed to capitalise on its improving prospects. As such, now could be the right time to buy it for the long run.
Growth potential
As mentioned, Boohoo seems to be in a strong position to capitalise on a continued trend of shoppers gravitating towards online channels. Although this is proving to be a gradual process, total global online retail sales are forecast to rise from $2,842bn in 2018 to $4,878bn in 2021. This suggests the pace of growth in the industry is expected to increase, as new technology makes it easier for consumers to not only buy products, but to have them delivered and returned.
Boohoo, of course, is expanding rapidly in a number of growth markets across the world. Recent updates have shown it’s generating impressive sales and profit growth across its various sites, and in a number of different countries. This trend could continue as consumers increasingly move towards purchasing clothing online, rather than in stores.
Since the company’s bottom line is forecast to rise by 25% in the current financial year, it appears to have a strong growth strategy. Despite this, a price-to-earnings growth (PEG) ratio of 1.6 indicates that the company could continue to offer a wide margin of safety. As such, now could be the right time to buy it.