2 high-growth stocks that are just getting started

Bilaal Mohamed thinks long runways for growth still remain for these top-performing small caps.

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If you were brave enough to have invested in 2009 following the dark days of the last financial crisis, then you’ll have benefitted a lot from the subsequent stock market bull run that will soon be in its ninth year. So does that mean we should now wait until the next big crash before buying? Absolutely not – that would be a very foolish strategy based on fear alone.

London and the South East

With this in mind, today I’m looking at two smaller companies that have indeed had a great run in recent years, but in my view should stand the test of time and continue performing well long into the future.

First up is small-cap integrated telecommunications group AdEPT Telecom (LSE: ADT). The AIM-listed firm, based in Tunbridge Wells in Kent is one of the UK’s leading independent providers of managed services for IT, unified communications, connectivity and voice solutions.

Transformation

It wasn’t always thus. In early 2015 the company embarked on a journey to transform itself from its original telecoms background into unified comms and then into IT, with a particular focus on London and the South East, as well as the public sector.

That looks to me like a sound strategy considering the fact that the economy in London and the South East is forecast to grow faster than the other regions in the UK, and that there is an increasing drive in the public sector to do more business with small and medium-sized enterprises (SMEs).

AdEPT is currently valued at just £68m, and last year generated £3.4m in pre-tax profits on revenues of £34.4m. At present levels I believe the shares offer exceptional growth at the very reasonable price of 13 times current year earnings.

Environmental technologies

For those who are still reluctant to go fishing for stocks in London’s junior AIM market then fret not, I may have found an equally worthy alternative. Porvair (LSE: PRV) is a company I first picked out last year as one of the stocks you might brag about owning some day, with the specialist filtration and environmental technologies group again enjoying another good year in 2017.

In a trading update last month, the Norfolk-based group said that underlying revenue growth for the year to November 2017 was 11%, largely due to higher levels of growth in its Microfiltration division, although sales in its Metals Filtration division were not so hot, remaining broadly flat. And while preliminary results aren’t due to be announced officially until later this month, it’s expected that full-year earnings will be somewhat ahead of management’s previous expectations.

Porvair has delivered strong growth in recent years, with the share’s high rating reflecting the market’s bullish long-term view on the stock. Nevertheless, the shares are still worth buying on a current year earnings multiple of 26. A little expensive perhaps, but I reckon they’re well worth the premium.

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 owns shares of Porvair. 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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