2 ‘under the radar’ growth stocks I’d consider buying today

Bilaal Mohamed discovers two ‘hidden gems’ from among the smaller London-listed companies.

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Sinclair Pharma (LSE: SPH) this morning announced its interim results for 2017, reporting a 16% rise in group revenues after particularly strong demand in Brazil for its aesthetic dermatology products.

Emerging markets

The AIM-listed group specialises in providing aesthetic dermatology solutions through collagen stimulation for facial volume loss, thread lifting for facial contouring and dermal fillers for wrinkles and lines. The company has an established sales and marketing footprint in the UK, France, Germany, Italy and Spain, as well as a rapidly-growing presence in emerging markets around the world.

For the six months to 30 June, revenues reached £20.1m, compared to £17.3m for the first half of 2016, with gross profit up 19% to £14.5m, together with a strong improvement in gross margin from 70.5% to 72.4%. Sales were bolstered by strong demand in Brazil, with the South American country becoming an increasingly important market for the group.

Facelift

In recent years, there has been growing demand for plastic surgery and other aesthetic treatments from the country’s rapidly-growing middle class population. Indeed, Sinclair’s Brazilian affiliate, created in July 2016, has already become the group’s largest direct operation in terms of sales.

I think a combination of vanity and an ageing population should help to drive growth both in Europe and worldwide long into the future. So right now, I feel that Sinclair Pharma could be the perfect stock to give your portfolio a much-needed facelift.

LED technology

Another London-listed small-cap worthy of a closer look at the moment is LED lighting specialist Luceco (LSE: LUCE). The £380m firm is a rapidly growing manufacturer and distributor of high quality and innovative LED lighting products and wiring accessories for a global customer base.

The Luceco LED lighting brand continues to benefit from the shift away from old-fashioned lighting technologies as a result of recent advancements in LED technology. The brand has continued to successfully leverage the group’s existing customer base and low-cost Chinese manufacturing facility, and remains well positioned to build on an already-impressive record of organic growth.

Meanwhile, in the electrical wiring accessories market, Luceco’s BG and Masterplug brands have continued to reinforce their market-leading positions through further new product development initiatives, expanding into new products and gaining market share.

Chinese expansion

Luceco operates a fully-integrated operating model which includes wholly-owned manufacturing and product development facilities in the UK and China that enables it to maintain strong control over its cost base and the quality of its products, while allowing it to bring products to market quickly and at low cost.

The business is also well positioned for future growth with recent investment made in the expansion of its Chinese manufacturing facility and sales network, both in the UK and internationally, to support the group’s existing and new product ranges.

Luceco’s shares have performed well since last October’s Stock Market debut, soaring from their IPO price of 130p to today’s levels around 237p, and I’ve no doubt they’ll continue to outperform. With double-digit earnings growth forecast for the next couple of years, I believe today’s valuation at 23 times forward earnings is still not too demanding given the promise of further expansion.

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 recommended Luceco. 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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