2 cheap growth stocks with millionaire-maker potential

These two stocks could deliver impressive capital growth.

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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.

Weir employee looking through product (abstract image). Ming Shen, Director of Marketing for Weir TRIO.

Finding shares which offer upbeat growth prospects at a fair price can be challenging. That’s especially the case at a time when major indices are trading close to record highs. In many cases, margins of safety are now fairly narrow and this means the risk/reward ratios on offer may be somewhat unattractive.

However, there are exceptions. Some stocks could still offer significant upside potential. Here are two prime examples that could help to propel you towards millionaire status in the long run.

Solid growth

Reporting on Thursday was developer and manufacturer of patented touch sensor products Zytronic (LSE: ZYT). The company updated the market with a pre-close statement ahead of its results for the period to 30 September. Revenue has continued to show encouraging progress compared to the prior year, with the company’s results expected to be in line with market expectations.

While it was a relatively short statement, the company’s share price fell 3% in response. This could be due to profit taking, since the stock has risen by around 60% in the last year.

Looking ahead, Zytronic is forecast to post a rise in its bottom line of 4% in the next financial year. While this is lower than the expected growth rate of the wider index, the company has a reliable track record of growth.

For example, in the last three years it has recorded an annualised growth rate of 24%. This shows that it has the potential to outperform the wider index when it comes to growth. And with what appears to be a sound strategy and growing demand for its products, now could be the right time to buy it for the long term.

Turnaround potential

Also offering investment potential at the present time is fellow industrials sector company Weir Group (LSE: WEIR). The company has endured a difficult few years as the price of oil has fallen and negatively impacted on activity within the oil and gas sector. This has contributed to four years of declines in the company’s earnings, which has put investor sentiment under pressure.

Looking ahead however, the company is expected to record a strong turnaround. Weir Group is forecast to deliver a rise in its bottom line of 52% in the current year, followed by further growth of 31% next year. This could be partly because of renewed confidence in the oil and gas industry as the oil price has risen to a two-year high.

This sharp improvement in its profitability could cause investor sentiment to improve dramatically. That’s especially the case since the company trades on a price-to-earnings growth (PEG) ratio of just 0.5 at the present time. This suggests that it has a wide margin of safety which could mean it is worthy of a much higher valuation. Certainly, the company’s shares could be volatile if the oil price moves lower. However, with upside potential it appears to be worth buying right now.

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 considered so you should consider taking independent financial advice.

Peter Stephens owns shares in Zytronic. The Motley Fool UK has recommended Weir. 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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