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These top-performing growth stocks could have further to run

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Despite the economic and political uncertainty in the UK at the current time, I’m inclined to think there are still many decent options available for growth-focused investors. Here are just two examples.

Golden opportunity?

Shares in sports and fashion retailer, JD Sports (LSE: JD) fell almost 11% in early trading this morning following the release of a trading statement to coincide with its AGM. Personally, I think this represents a golden opportunity to grab a slice of a high-performing, quality business.

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The update isn’t even bad. According to Chairman Peter Cowgill, group like-for-like sales remain “in line with expectations” with “further significant growth” being seen online. Elsewhere, JD continues to expand its store estate at a rapid pace with 28 new sites opening over the period, including two in Australia and two in Malaysia. 

Today’s market (over)reaction to what appears to be a largely positive update looks like a classic case of expectations overtaking reality. The mention of “some anticipated margin pressure” appears to have spooked many, even though the company made the point of saying that it didn’t foresee this impacting on full-year results.

Before today, JD’s shares traded at 18 times earnings based on expected EPS growth of 15% for the current financial year. While not cheap, it’s certainly a lot less expensive relative to historical valuations, particularly given the £3.9bn cap’s track record of growing revenue and profits at a furious rate over the last few years. The returns it generates on the money it invests continues to climb and a net cash position of £214m at the end of the last financial year shows just how strong JD’s finances are in comparison to many of its high street peers.

I’d ignore today’s absurd reaction. As growth shares go, the Bury-based business remains a class act.

More growth ahead 

Investment manager Polar Capital (LSE: POLR) is another company with excellent growth credentials. Unfortunately, this hasn’t gone unnoticed by the market with shares in the £410m cap rising 51% over the last 12 months. Given the growing demand for its services however, I can see this continuing for some time to come.

In the year to the end of March, assets under management at Polar rose to £9.3bn (from £7.3bn the year before). By the end of May, this had increased further — to £9.8bn. While full-year core operating profit fell 8% to £21.8m, adjusted diluted earnings per share still came in ahead of expectations.

Over 2016/17, Polar expanded its range through the introduction of a UK Value Opportunities fund — raising over £100m on its launch in January. By May, the fund had assets worth over £256m. Since the end of the reporting period, the company’s Healthcare Investment Trust has also been restructured.

Commenting on this week’s results, outgoing CEO Tim Woolley reflected on the “significant opportunities” for the company, particularly in relation to expanding beyond the UK wealth management industry.

With 66% EPS growth now expected in 2018, giving a price-to-earnings growth (PEG) ratio of just 0.89, a history of generating consistently high returns on capital, great margins, lack of net debt and a cracking 5.6% dividend yield, Polar presents as a solid choice for growth and income investors alike. 

At 16 times forecast earnings, I think the shares certainly warrant further investigation.

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Paul Summers has no position in any shares mentioned. The Motley Fool UK has recommended Polar Capital Holdings. 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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