2 momentum stocks expected to deliver double-digit earnings growth

Royston Wild runs the rule over two white-hot earnings shares.

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Records and document manager Restore (LSE: RST) has failed to make a ripple in Monday business despite the release of reassuring trading details. Indeed, the stock was last fractionally lower from last week’s close.

But this comes as no little surprise as investors draw breath following Restore’s rapid share price ascent of late. The Redhill company has risen 11% in the past six weeks alone and touched fresh record peaks above 430p per share earlier in May.

Restore chairman Sir William Wells said today: “I am pleased to report that 2017 trading has started well across the group, with the benefits of the acquisition of PHS Data Solutions in August 2016 being delivered in line with expectations.”

The recently-purchased PHS scanning and shredding division provides Restore’s Document Management division with additional scale. Wells added that the arm — which also incorporates Restore’s core records management operations — is “trading well.”

Elsewhere, trading at Harrow Green (the heart of the Relocation division) is trading in line with expectations, Wells noted. And promisingly, the firm’s toner cartridge recycling arm ITP “is showing improvement following its poor performance in 2016,” according to the release.

Today’s update certainly gives me more belief that Restore, which already has a rich record of double-digit earnings expansion, can keep its bottom-line momentum going. And my confidence is shared by the City, which expects the storage specialist to carve out growth of 17% and 13% in 2017 and 2018 respectively.

I reckon a subsequent forward P/E ratio of 20 times is great value given the rich earnings pedigree, not to mention the terrific profits potential of recent acquisitions across the business.

Flying high

I also believe FTSE 250 star SSP Group (LSE: SSPG) has a bright future as new business blooms all over the world.

Like Restore, SSP — which provides food and other traveller comforts at airports and railway stations — is no stranger to excited investor appetite, the stock topping out at all-time highs above 480p per share. The stock has gained a quarter in value since the turn of the year alone.

And perky share picker faith was vindicated by last week’s forecast-beating half-year update. SSP advised that revenues soared 19.6% during October-March, to £1.07bn, with like-for-like sales rising 2.9% in the period.

The company advised that new business levels rose 3.4% last year, up from 2% the prior year thanks to a spate of store openings. New contract gains in North America exploded 11.1%, for example, and SSP has a number of juicy new contracts in the pipeline to keep revenues rolling.

Following last year’s return to growth, the Square Mile’s army of brokers expect SSP to keep the run going with advances of 13% in the year to September 2017, and 11% in the following 12 months.

And similar to Restore, SSP subsequently deals on a heady paper valuation, the firm sporting a forward P/E ratio of 27.3 times for the current period. But I reckon the travel titan is a similarly-appetising pick thanks to its exciting expansion strategy.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of SSP 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.

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