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2 growth stocks I’d buy right now for 2018

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UK home builders have been on a tear in recent years, and if today’s results from Cairn Homes  (LSE: CRN) are anything to go by, a buoyant housing market isn’t just limited to this region. 

The Irish homebuilding firm today announced that for the year to 31 December, revenues increased significantly to €149m from €40.9m and the company is expected to report EBITDA for the full year of €15m at the high end, up a staggering 290% from the €3.8m reported for 2016. 

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And it looks as if this growth trend is set to continue as according to today’s press release, the company is starting 2018 with a “with a strong forward sales pipeline with a net sales value of €134.3m…which underpins H1 2018 sales.” What’s more, CEO Michael Stanley is highly optimistic about the group’s future growth potential thanks to the “historical cost of our land bank” as well as the firm’s “focus on competitively priced houses and premium apartments.” 

Cheap growth

City analysts appear to agree with management’s outlook. Indeed, analysts have pencilled in revenues of €344m for full-year 2018, and a pre-tax profit of €58m, up five-fold from 2017’s predicted figure of €10m. Based on these numbers, analysts have the shares trading at a deeply discounted forward earnings multiple of 7.7, which to me seems too cheap for such a rapidly growing business. That’s why I’d buy the stock for 2018. 

One of a kind 

Shares in Abcam (LSE: ABC) have surged by more than 126% excluding dividends over the past five years, and despite this expansion, I believe that the company still has plenty of room left to grow (although my Foolish colleague Roland Head seems to disagree). 

Today the supplier of life science research tools reported a half-year trading update for the six months ended 31 December showing revenue growth of 11%. All product categories saw sales up “ahead of estimated underlying market growth rates.” 

Life sciences is a niche market, so those companies that have established a reputation for themselves have a substantial competitive advantage. And for Abcam, a business well-established in the specialist market of life science research tools this advantage isn’t going to disappear anytime soon. The company is investing heavily in improving its offering to customers, devoting funding to researching new devices and product lines for customers. This spending should help keep the firm ahead of competitors and ensure stable growth going forward. 

Growth through research 

City analysts are expecting the firm to report earnings per share growth of 19% for the year ending 30 June 2018 on a pre-tax profit for £75m. These figures might come in above expectations, however, as today the group warned that it will see a tax benefit of up to £7m due to changes in US tax law. 

Unfortunately, shares in Abcam are not cheap. They currently trade at a forward P/E of 34.6. Still, while most companies do not deserve such a lofty valuation, considering the firm’s substantial competitive advantage, and double-digit earnings growth, I believe that this is a premium worth paying. 

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Rupert Hargreaves owns no share 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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