2 stocks that could make you rich

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

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International veterinary drugs firm Dechra Pharmaceuticals (LSE: DPH) has undoubtedly been one of the stock market’s great success stories over the past decade or so. Rapid growth and worldwide expansion have transformed the Northwich-based firm into a global business now valued at more than £1.8bn.

Hop on board

As profits have soared, so too has the FTSE 250 firm’s share price, rising from lows of just 43p in 2003 to today’s record highs of 1,995p. That’s all well and good for those who have kept the faith in the company since those earlier years, but what about new investors? Is it too late for them to hop on board?

This morning the business announced its preliminary results for the year ended 30 June, giving both existing and would-be investors plenty to cheer about. The group posted a 45.1% improvement in full-year revenues to £359.3m, with an even more impressive 54.9% rise in underlying pre-tax profits to £77m, from £49.7m just a year ago.

Animal welfare

I don’t see any let-up in growth for Dechra. Animal welfare is being taken ever more seriously, not only in Western countries, but also in the developing world. So not only is the company continuing to launch new products, it’s also pressing ahead with plans to expand its geographical reach.

For me, Dechra remains a good long-term buy given the potential for further growth and expansion. From a valuation perspective, a forward P/E ratio of 27 may look expensive, but I believe it’s a price well worth paying given the healthy outlook.

Out with the old

Another Cheshire-based firm reporting today was Johnson Service Group (LSE: JSG). Half-year figures for the textile services business revealed another strong performance, with revenues increasing by 19.3% to £138m, driven by strong organic growth of some 4.8% and a full six months of trading from the acquisitions completed in 2016. Adjusted pre-tax profits increased by 23.5% to £16.8m from £13.6m after net finance costs of £1.8m, which were £100k lower than in the previous year.

In a separate statement the AIM-listed group announced the departure of its CEO, Chris Sander, who after 33 years will be retiring in the first half of 2018. Its seems Mr Sandler is leaving on a high with the business in excellent shape and very well placed for continued growth.

More focused

The decision earlier this year to forsake its 200-year-old Johnson Cleaners business was a bold but necessary one in my opinion. By the company’s own admission, the dry cleaning market has been challenging in recent years, and the disposal leaves the group free to concentrate on its higher-margin textile rental businesses.

There’s still plenty of opportunity in this market for both organic and acquisition-led growth and I see a P/E rating of 17 as a very reasonable price to pay for what is now a much more focused business.

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. 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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