2 little-known growth stocks with exciting momentum

Royston Wild discusses two shares expected to deliver terrific earnings growth.

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Momentum investors who put money into Veltyco Group (LSE: VLTY) a year ago must be smiling like Cheshire Cats right now.

The stock has gained 350% in value since last September, and added 14% in Monday business alone following a buoyant response to half-year numbers.

Veltyco — which provides marketing services to the gaming, binary options and lottery sectors — advised that revenues tore 202% higher between January-June, to €6.36m, a result that exceeded total sales worth €6.08m punched in the whole of 2016.

As a result, EBITDA in the period exploded 410% in the six-month period, to €3.8m,

Commenting on the interim results, chairman David Mathewson said: “It has been an exciting first half year of 2017 for the group and we are very happy to see such a strong trading performance during this period, which produced very good results for the period reported.”

And this fizzy first-half result was not the only reason for Veltyco to celebrate. Indeed, Mathewson noted that “trading in the third quarter of 2017 continues to be strong and we now expect the business will exceed current market expectations for the full year.”

The Isle of Man-based firm completed the acquisition of 51% stakes in both the Bet90 online operations and Tippen4you.com operations in the period. And the Veltyco chairman advised that the company “[continues] to review potential acquisition opportunities which fit into the company’s profile.”

Profits ready for lift-off?

So it should come as no surprise that the City expects earnings at Veltyco to shoot higher in the near term and beyond. In 2017 earnings are predicted to swell to 7.1 euro cents per share from fractional earnings last year. And another further meaty increase, to 8.1 cents, is forecast for 2018.

Moreover, current forecasts make the marketing star great value for money — a prospective P/E ratio of 15.5 times falls just roughly in line with the widely-considered value yardstick of 15 times. I reckon this makes Veltyco worthy of serious attention given the titanic revenues potential of its M&A strategy.

Another growth great

4Imprint Group (LSE: FOUR) is another ‘under the radar’ share that has continued marching skywards in recent times. Indeed, the marketing products producer has seen its share price surge by around a quarter during the past six weeks following a bubbly reception to half-year results back at the start of August.

4Imprint advised that revenues rose 11% between January and June, to $298.1m, a turnout that propelled underlying pre-tax profit 15% higher to $16.5m. Stock pickers piled in on news that “organic revenue growth in both North American and UK markets continues to outpace the growth rates of the industry as a whole,” with both customer numbers and orders continuing to steadily rattle higher.

And City analysts expect earnings to keep galloping northwards. Bottom-line rises of 10% are chalked in for both 2017 and 2018, and while current forecasts may produce a slightly-hefty forward P/E ratio of 24 times, I reckon this still represents decent value given 4Imprint’s terrific sales momentum.

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Royston Wild has no position in any of the 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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