2 growth stocks I’d consider buying right now

Royston Wild runs the rule over two white-hot FTSE 250 growth shares.

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Shares in Diploma (LSE: DPLM) were solid-if-unspectacular in Tuesday trade, the stock still settled following the release of half-year numbers yesterday.

The industrial distributor remains a whisker off recent record peaks above £11.30 per share however, and I fully expect this level to be breached in the near future as conditions in its key markets improve.

Diploma announced this week that revenues soared 21% during October-March, to £217.3m, a result that propelled adjusted pre-tax profit 22% higher to £37.1m.

The London business has seen organic sales growth accelerate more recently, with underlying sales growing 8% during the second quarter versus 4% in the prior three months.

And Diploma expects much more to come, noting that while beneficial currency movements should lessen during the second half of the year, that “the global trading environment is expected to provide opportunities for continued underlying growth in the group’s key markets.”

Full house

Promisingly, Diploma saw organic sales grow across all of its main divisions in the first half. Sales at Seals and Life Sciences rose 2% in the period. And the firm’s Controls arm stole the show as underlying revenues screeched 16% higher.

And Diploma remains busy on the acquisition front to keep the top line chugging higher further out. The company snapped up Abacus — a clinical diagnostics instrumentation and consumables supplier — late last month, and advised this week that its M&A pipeline remains “encouraging.”

The City certainly expects Diploma to keep its long-running growth story rolling, and has chalked in expansion of 12% and 5% in the years to September 2017 and 2018 respectively.

And I reckon a subsequent forward P/E ratio of 23.4 times is a fair valuation as sales growth gathers steam.

Plastics fantastic

RPC Group (LSE: RPC) is another FTSE 250 stock with electrifying growth potential. But unlike Diploma, I believe RPC can also be considered an attractive pick for those seeking hot earnings potential at bargain prices.

City brokers expect the plastics manufacturer’s splendid profits history to continue with a 16% earnings rise this year (a 44% advance is chalked in for the 12 months to March 2017). This leaves RPC dealing on a forward P/E ratio of just 12.1 times, while a sub-1 PEG multiple of 0.7 underlines the firm’s exceptional value.

The Northamptonshire business, which makes a variety of packaging products from yoghurt pots to contact lens cleaner bottles and the plastics that hold multipack cans of drink together, is expected to follow this year’s advance with an 8% rise in fiscal 2019 too. I believe RPC has all the tools to keep profits marching skywards.

RPC noted in March that “revenues for [fiscal 2017] are anticipated to be significantly ahead of last year, reflecting contributions from acquisitions and continued underlying organic growth.”

RPC’s insatiable appetite for M&A is certainly paying off handsomely, with the integration of GCS and BPI already running ahead of expectation. And the company’s strong appetite for bolt-on buys, along with the highly-fragmented state of the market, leaves plenty of scope for further purchases along the line.

And with the underlying packaging sector still growing at a solid rate, I believe RPC is in great shape to deliver meaty earnings growth long into the future.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended RPC Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 14% in 2024, what’s next for the Lloyds share price?

This Fool takes a closer look at what prompted the Lloyds share price to rise this year, and offers her…

Read more »

Investing Articles

5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here's…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

3 growth stocks I’m desperate to buy as the FTSE 100 dips

Never waste a dip, says Harvey Jones. Three of his favourite growth stocks have fallen over the last month and…

Read more »

Investing Articles

I’d use a £10K ISA to try and generate £900 in dividends annually like this!

Christopher Ruane explains how he would invest a Stocks and Shares ISA in blue-chip companies to try and set up…

Read more »

Investing Articles

Here’s how I’d build a second income stream worth £1,228 a month by investing £10 a day!

A second income stream could come in handy later in life. This Fool explains how she’d build one by investing…

Read more »

Investing Articles

5 FTSE 250 stocks I’d buy for a lifetime of passive income

Here's why I think the FTSE 250 could be the best UK stock market index to go for in 2024…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Buy cheap FTSE shares, says HSBC

Analysts at HSBC have upgraded their rating of FTSE stocks and reckon the blue-chip UK index could carry on powering…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

It could be worth buying the dip for this FTSE 250 stock, down 7% today

Jon Smith spots a sharp drop in a FTSE 250 stock but explains why this could just be a blip…

Read more »