2 great growth stocks trading much too cheaply

Royston Wild discusses two stocks with exceptional growth potential.

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Georgia Healthcare Group’s (LSE: GHG) share price was unchanged in Tuesday business despite the release of strong first-half figures.

The business — which provides a range of health-related care including hospital treatment, medical insurance and pharmacy services in Georgia — announced that revenues blasted 112.9% higher between January and June, to £371m. This forced pre-tax profit 44.9% higher, to £24.3m.

Thanks to the recent acquisitions of local pharmacy chains Pharmadepot and GPC, Georgia Healthcare saw the top line at its pharma division explode 624.5% in the first half, to £222.3m. Meanwhile, organic sales at its healthcare services arm continued to grow at double-digit rates, the firm noted. Total turnover here increased 11.5%, to £132.9m.

It was not great news across the board however, the medical mammoth enduring a 6% revenues fall at its medical insurance arm, to £27.4m. Still, Georgia Healthcare noted that it had begun to “make progress towards stabilising its earnings, following the expiration of its lossmaking contract with the Ministry of Defence in January 2017.”

In good health

Chief executive Nikoloz Gamkrelidze commented that the company “is in a strong period of growth and evolution,” and added that the firm “is in a significant business rollout phase in a number of key areas and, in the first half of 2017, has continued to make strong progress in integrating recent acquisitions and delivering key organic growth priorities.

Over the next few years in our healthcare services business, we aim to achieve one-third market share by hospital beds, invest to close existing medical service gaps, and deliver a rapid launch of Polyclinics in the highly fragmented and under-penetrated outpatient market,” Gamkrelidze continued.

He added that at its pharma business it is “[aiming] to achieve more than 30% market share by revenue whilst improving the EBITDA margin to more than 8%.” The company now has 247 pharmacies spanning the length and breadth of Georgia.

The City certainly believes these plans should underpin perky profits growth, and expects earnings to rise 18% in 2017 and 46% next year.

While a forward P/E ratio of 24.6 times may look a tad hefty on paper, a PEG reading of 1.4 suggests that Georgia Healthcare is actually pretty attractively-priced given its immediate growth prospects.

Given the firm’s rising clout in a hot Eastern  European growth market, I reckon the business should be attracting serious glances from growth investors right now.

Jobs giant on the march

The number crunchers are pretty positive over the growth prospects of Hays (LSE: HAS) too and it is not difficult to see why.

While the recruitment giant has been witnessing  some weakness in its home territories of late — net like-for-like fees in the UK and Ireland dropped 5% in the 12 months to June 2017 — its broad geographic footprint should provide the platform for excellent profits growth in the years ahead. The business saw underlying net fees in Asia Pacific rise 11% last year, and by a similar percentage across its other overseas territories.

City brokers are expecting Hays to follow an anticipated 16% earnings rise in fiscal 2017 with an 8% advance next year. And this forward projection results in an undemanding P/E multiple of 15.9 times. I consider this to be brilliant value given the staffer’s stunning progress around the globe.

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 no position in any of the shares mentioned. 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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