2 exciting growth stocks I’d buy right now

Bilaal Mohamed identifies two London-listed companies with spectacular growth potential.

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Leading international infrastructure group Balfour Beatty (LSE: BBY) finally returned to profit in 2016 after a couple of years in the red, and several years of significant underperformance. Last week’s full-year results for 2016 were in stark contrast to those of the previous year when the group suffered an underlying pre-tax loss of £123m.

Build to last

For a group the size of Balfour Beatty a pre-tax profit of £60m may not sound like a lot, but add to that a £300m uplift in underlying revenues, and I think the group’s transformation programme may be beginning to bear fruit. Management embarked on its ‘Build to Last’ transformation programme at the start of 2015 to address issues with all its stakeholders, including customers, suppliers, employees, and subcontractors.

By its own admission, the group had become overly complex after more than a decade of acquisition-led forced growth. I think it’s refreshing to see a company finally admitting its own failings and embarking on a mission to turn things around. Having simplified the group, Balfour is now focused on its core markets in the UK and US, where governments are more committed to large-scale expenditure on infrastructure.

Healthy order book

Things certainly seem to be moving in the right direction, with the UK construction business returning to profitability in the second half of 2016, and a much healthier order book up 15% at £12.7bn. City forecasters also seem to be optimistic about the company’s prospects, with consensus estimates suggesting a £419m jump in revenues to £7.35bn for the current year, and a massive surge in pre-tax profits to £127m.

With revenues and profits expected to climb even higher in 2018, I think Balfour’s turnaround has well and truly begun. And with the forward P/E ratio dropping to 12 by the end of next year, I believe there’s plenty of growth left in the share price too.

Landmark year

Meanwhile, another London-listed company celebrating a successful 2016 is Jimmy Choo (LSE: CHOO). The London-based luxury fashion brand may be best known for its designer shoes, but it also specialises in high-end handbags, accessories and fragrances.

According to its CEO Pierre Denis, 2016 was a landmark year for the firm, as it celebrated 20 years in business with record levels of revenue and profitability. Total revenues grew 14.5% to £364m for the year, thanks mainly to the weaker pound, with adjusted earnings (before interest, tax, depreciation and amortisation) up 15.7% to £59m.

I believe the outlook is positive for Jimmy Choo as it continues to deliver its long-term growth strategy with sustained expansion of its distribution network, particularly in areas such as Asia where it remains under-penetrated. Asia has been a key target for luxury accessories brands. But while many have over-extended themselves and had to scale back in recent years in markets like China, for Jimmy Choo there is still lots of potential to grow.

I think the shares offer good value too, with the P/E ratio dropping to 17 next year, much lower than its three-year average of 26.

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.

Bilaal Mohamed 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.

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