Two under-the-radar growth stocks I’d buy today

Edward Sheldon looks at two companies you may never have heard of.

| More on:

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.

To make money in the stock market, you don’t need to buy the latest ‘hot’ stocks that every investor is talking about. There’s plenty of money to be made buying companies that the majority of investors haven’t even heard about. With that in mind, here’s a look at two under-the-radar stocks that I believe look interesting right now.

Sanne Group

Sanne Group (LSE: SNN) provides outsourced administration, reporting and fiduciary services to asset managers, financial institutions, family offices and corporates. The company has over 1,000 clients across the Americas, EMEA and Asia Pacific and administers funds in excess of £160bn. The stock floated in April 2015 at 200p, and has surged to over 750p in less than two-and-a-half years.

The company is benefitting from strong demand for its services, as a result of increased regulation and cross-border investment, combined with the “growing expectation for independent oversight.” Through both acquisitions and organic growth, Sanne Group has enjoyed significant growth over the last three years, with its top line rising from £26m in FY2013 to £63.8m last year. Underlying earnings per share jumped from 13.9p to 17.4p last year, an increase of 25%.

The outsourcing specialist released interim results this morning, and the numbers look impressive. Revenue surged a formidable 104% to £56.3m, of which 15.3% was organic growth, and underlying profit before tax rose 105% to £20.9m. Underlying diluted earnings per share increased 60% to 13p, and the company lifted its interim dividend by 31% to 4.2p. Furthermore, management advised that as a result of a lower expected effective tax rate, full-year underlying earnings are expected to be marginally ahead of previous expectations.

The shares have pulled back a little this morning, which is probably not a bad thing after a near 70% rise in the last 12 months. I don’t think the current valuation of 31 times FY2017 consensus earnings estimates is unjustified, given the company’s growth history.

NCC Group

Another stock that could be worth a look right now, for risk-tolerant investors, is cyber security expert NCC Group (LSE: NCC). 

Shares in NCC Group enjoyed a strong rise between 2013 and 2016, as the company made a series of acquisitions that boosted its top line. However, in late 2016, it became apparent the cybercrime specialist had grown too quickly, and back-to-back profit warnings saw the stock plummet from above 350p, down to around 110p.

NCC is operating in a fast-growing industry, as cybercrime is one of the single biggest threats to businesses, governments and individuals in today’s world. So the vital question is – can the company turn things around? I’m inclined to think they can.

City analysts forecast net profit of £20.7m for FY2018, a significant rebound from the £56.6 net loss recorded in FY2017, and earnings per share are expected to come in at 7.3p, up from 6.7p last year.

In July, management said: “When we have successfully managed our way through this transitional period, improved our organisation and how we go to market, we see significant upside opportunities and material value creation. The Board is confident that the Group can deliver sustainable earnings growth and enhanced shareholder value once it has more robust foundations in place.”

The investment case is clearly not risk-free, however for risk-tolerant investors with a long-term investment horizon, I believe there could be an opportunity here.

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.

Edward Sheldon owns shares in NCC Group. The Motley Fool UK owns shares of NCC. 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

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »