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2 growth stocks I’d buy in January

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While rising political choppiness and tougher macroeconomic conditions may affect the fortunes of many UK-focused shares in 2018, I am convinced that Cineworld (LSE: CINE) should continue to prove its mettle as a reliable growth share.

Britons’ love of the silver screen is something that is now bankable, with new records for box office takings now being set year after year. And the steady flow of blockbusters is helping to attract more and more film addicts through the doors (Star Wars: The Last Jedi grossed a staggering $450m at the global box office in its first weekend, underlining the enduring popularity of so-called franchise films).

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Meanwhile, Cineworld’s screen expansion scheme, site refurbishment programme, combined with the rollout of new technologies (like 4DX) is also helping to drive the top line. The FTSE 250 firm saw box office takings in its home market rise 5.8% during the year to November 19.

Picture perfect

Strong moviegoer appetite in the UK is not the only reason to expect Cineworld to deliver strong earnings expansion in the years ahead.

The company is also a major player across Central and Eastern Europe and Israel, of course, and takings in these regions rose 8.1% during in 2017 up to November 19. Cineworld is expanding further overseas — the firm has opened two cinemas in Poland, one in the Czech Republic and one in Romania in the second half too.

The screen star is now looking further afield to light a fire under future earnings. The market may have reacted poorly to news that the company has bought US-based Regal Entertainment Group for $3.6bn but I believe the entry into the world’s biggest movie market is a bold and exciting move for the years ahead.

In the interim, Cineworld is expected to deliver earnings growth of 8% and 9% in 2017 and 2018 respectively. And current forecasts mean than the business deals on an undemanding forward P/E ratio of 15.6 times.

With the business also offering up chunky dividend yields of 3.5% for the outgoing period and 3.8% for next year, I reckon the share is a compelling selection right now.

Global star

I am also convinced Boohoo.Com  (LSE: BOO) has what it takes to keep delivering meaty profits improvement year after year.

The online clothing retailer continues to pull up trees at home, but this is not the only reason for celebration as sales across the business are also pounding higher in international markets. Over at acquired e-tailer Pretty Little Thing, Boohoo said that “the international business is gaining considerable momentum, with international sales being nearly seven times higher than in the first half of the previous year.” As a result group revenues boomed 106% during March-August.

Fears over declining margins have seen Boohoo fall out of favour with share pickers more recently. However, the investments that have driven this (like the automation of warehousing operations) should create significant upside in the coming years.

City brokers are predicting a 28% bottom-line uplift in both 2017 and 2018, and although value chasers may be put off by an elevated prospective P/E rating of 64.8 times, I reckon Boohoo’s exceptional sales momentum across the world merits such a valuation.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended 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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