2 stocks to help you retire as a millionaire

These two shares could deliver stunning gains.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Finding stocks with high growth rates can be challenging. In many cases, they trade on valuations which make them difficult to justify from an investment perspective. However, the reality is that for investors seeking to generate high returns in the long run, growth stocks could be the best place to invest. The stock market has historically rewarded those companies which are able to offer above average growth on a consistent basis. Here are two such companies which could be worth buying at the present time.

Banking sector potential

The UK banking scene has been shaken up in recent years by challengers such as Metro Bank (LSE: MTRO). It has sought to provide a differentiated product to customers by embracing technology and a greater focus on customer service. This seems to have been popular with consumers, since the company’s bottom line is due to move from loss to profit in the current year.

In fact, this is forecast to be followed by earnings growth of 132% in 2018. Since Metro Bank trades on a price-to-earnings growth (PEG) ratio of just 0.3, it seems to offer a wide margin of safety as well as significant upside potential. Certainly, that rate of earnings growth is unlikely to continue in the long run. But with the banking sector changing rapidly as technology developments continue, Metro could offer double-digit earnings growth over a sustained period.

Looking ahead, the UK economy may endure a challenging year, with Brexit negotiations set to start shortly. This may cause consumers to hold back on major purchases, such as houses, and lead to a downgrade in Metro’s forecasts. However, this seems to already be priced-in thanks to its low valuation. Therefore, for investors looking to generate high returns in the long run, it could be a sound stock to buy.

Security opportunity

Cyber security is becoming a more valuable service. The threat of disruption to everyday life increases as businesses and individuals depend on technology to an ever-increasing extent. Therefore, investing in a cyber security company such as Sophos (LSE: SOPH) could be a sound move.

The company is forecast to record a rise in its bottom line of 71% next year, followed by 25% the year after. While it trades on a price-to-earnings (P/E) ratio of 55.8, when combined with its growth outlook this equates to a price-to-earnings growth (PEG) ratio of just 1.2. This seems to be a reasonable price to pay given the company’s potential to record double-digit earnings growth over a number of years.

The fact that Sophos is expected to increase dividends per share by 80% between 2016 and 2018 indicates its management team is confident in the long-term outlook of the business. While its 1.2% yield means it is a long way from being an income stock, investor sentiment could improve as its shareholder payouts increase. Therefore, now seems to be the right time to buy a slice of the business for the long term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »

Investing Articles

I think the Rolls-Royce dividend is coming back – but when?

The Rolls-Royce dividend disappeared in 2020 and has not come back. But with the company performance improving, might it reappear?

Read more »

British Pennies on a Pound Note
Investing Articles

Should I snap up this penny share in March?

Our writer is considering penny shares to buy for his portfolio next month. Does this mining company merit a place…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Stock market bubble – or start of a bull run?

Christopher Ruane considers whether the surging NVIDIA share price could be symptomatic of a wider stock market bubble forming.

Read more »

Investing Articles

Buying 8,254 Aviva shares in an empty ISA would give me a £1,370 income in year one

Harvey Jones is tempted to add Aviva shares to his Stocks and Shares ISA this year. Today’s 7.37% yield isn't…

Read more »

Investing Articles

Is the tide turning for bank shares?

Bank shares are trading on stubbornly cheap-looking valuations yet business performance in the sector is broadly robust. Should our writer…

Read more »