One of the best areas of the market to look for investment opportunities right now in my opinion is the mid cap space. I think in this area there are a good number of shares that have the potential to grow into much larger entities in the future.
Three top mid cap shares I would buy this month are listed below. Here’s why I like them:
Adairs Ltd (ASX: ADH)
Adairs is a homewares retailer that has continued to deliver solid growth in spite of the housing market weakness. Last month it posted a 10.6% increase in half year sales to $164.4 million. This was driven by a 7.3% increase in like-for-like sales, strong online sales growth, and the addition of four new stores to its network. On the bottom line it posted a 9.1% lift in net profit after tax to $14.9 million. This strong form allowed its board to lift its interim dividend by 18% to 6.5 cents per share, meaning its shares provide a trailing fully franked 7.8% yield. Pleasingly, with the company reporting like-for-like sales growth of 7.1% for the first seven weeks of the second half, I expect Adairs to deliver a strong full year result in August.
Citadel Group Ltd (ASX: CGL)
Citadel Group is a software and services company which specialises in secure enterprise information management in complex environments. Its shares fell heavily last month after the release of a softer than expected half year result. In the first half of FY 2019 Citadel posted a 5.5% increase in revenue to $49.1 million and a 5.4% lift in net profit after tax from continuing operations to $5.1 million. It is worth noting that the soft result was largely due to its transition of Citadel’s sales focus towards scalable solutions that provide annuity revenue streams. Pleasingly, the company is growing strongly in all the right areas. For example, SaaS revenue grew 39.1% to $16.8 million during the half. This segment now accounts for just over a third of total revenue.
Helloworld Travel Ltd (ASX: HLO)
This integrated travel company’s shares also fell heavily last month. But rather than being due to its half year results, investors hit the sell button in a hurry after Helloworld was caught up in a political scandal. I think this selling was an overreaction and has left its shares trading at a very attractive level of just under 16x trailing earnings. This looks cheap to me considering management’s full year guidance for EBITDA growth of between 16.5% to 22.7%.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Helloworld Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.