2 under-the-radar growth stocks with brilliant momentum

Royston Wild runs the rule over two terrific growth stocks that are still tearing higher.

| 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.

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.

Midwich Group (LSE: MIDW) saw its share price go gangbusters in Tuesday trade. The stock was last dealing up 8% on the day after a terrific reception to half-year numbers, meaning that it has gained a total of 85% during the course of 2017.

The company, which distributes audio visual and document solutions to trade, advised that revenues shot 34% higher during January-June to £211.6m. As a consequence adjusted pre-tax profits improved 32% to £10.3m.

Stephen Fenby, chief executive, commented: “The group has performed strongly in the first six months of the year across all geographies with robust organic growth and contributions from recent acquisitions Holdan and Earpro.” He highlighted strong growth in large format displays, in particular, as well as Midwich’s progress in the developing specialist broadcast and audio segments.

Fenby added: “The strong performance reported in the first half year coupled with indications of positive sales momentum and strong contributions from recent acquisitions gives the Board confidence in reporting results for the full year in line with our expectations, which were upgraded at the time of [July’s] trading statement.”

With Midwich also reporting robust cash generation, the firm elected to lift the interim dividend 36% year-on-year to 4.17p per share.

In splendid shape

Investors should be cheered by the massive headway Midwich is making across all regions — the company saw sales increase by double-digit rates in all its territories, led by Germany and Australasia where turnover grew 47% and 44% — as well as impressive, M&A action.

The firm noted that recent buyouts have “performed ahead of expectations.” And the company’s robust balance sheet should keep the position-enhancing acquisitions coming — the firm snapped up audio visual and lighting products distributor Gebroeders van Domburg just last week for a minimum of €2.1m.

So it comes as little surprise that City analysts expect profits to rise 14% in 2017, with an extra 7% advance marked in for next year. As a consequence, Midwich deals on a forward P/E rating of 20 times, very decent value in my opinion given the terrific headway it is making across the globe, not to mention the potential for forecast upgrades further down the line.

In rude health

Renishaw (LSE: RSW) has been no stranger to stratospheric share price gains in recent times either. The healthcare engineer has seen its market value almost double since the bells rang in New Year’s Day, and I fully expect the share price to remain on an upward trajectory.

The Gloucestershire company reported record revenues of £536.8m in the first half of 2017, up 26% year-on-year, with sales growing across all healthcare segments. And Renishaw is investing heavily in its marketing and distribution facilities across the globe to keep sales on an upward bent — it forked out £42.6m in capex in the year to June 2017 alone.

The City expects Renishaw to print a further 10% earnings rise in fiscal 2018, resulting in a toppy-looking prospective P/E rating of 33.8 times. Still, I reckon the firm’s ambitious growth strategy, not to mention the huge sales potential of its ever-expanding markets, makes the business worthy of this premium.

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 of the stocks mentioned. The Motley Fool UK has recommended Renishaw. 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

Fans of Warren Buffett taking his photo
Investing Articles

Warren Buffett believes this one investing rule is key to his success

In this article, I'll use my position in a UK-listed ETF to help illustrate a well-known 'investing trick' that's favoured…

Read more »

Investing Articles

How many National Grid shares must I buy for a £100 monthly second income?

I think National Grid could be one of the safest options for investors seeking a dividend income. And today its…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

NIO stock is down 90%. Will it recover?

NIO stock has fallen significantly from its 2021 all-time high. But could now be a chance for this Fool to…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

These 2 UK shares could help me reach £1,000,000 in my Stocks and Shares ISA

A FTSE 100 compounding machine and a FTSE 250 value stock are the UK shares Stephen Wright thinks could help…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

If I’d invested £1,000 in Lloyds shares at the start of the year, here’s what I’d have now

The stock market is unmoved, but Stephen Wright thinks last year’s record profits might give Lloyds shares a long-term boost.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

I’ll snap up shares in this growth stock in March if others don’t get there first

This Fool says shares in this growth stock are stable, full of profit, and might be undervalued. But there are…

Read more »

Rainbow foil balloon of the number two on pink background
Investing Articles

My 2 top energy investment trust picks for a passive income

I'm aiming to buy more of these investment trusts for a passive income and the reasonably stable energy sector returns…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

5.5% dividend yield! Shares like these could be great for my retirement

Oliver Rodzianko thinks this company with a stellar dividend yield could be very useful when looking for income from his…

Read more »