The Motley Fool plc isn’t the only growth stock that could make you a millionaire

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Over the past few years, (LSE: BOO) has racked up a record as one of the UK’s top growth companies. The online clothing retailer has captured the imagination of investors and customers as its low-cost offering has disrupted the industry. 

Earnings per share have risen 10-fold, and since its IPO, at the beginning of 2014, the stock has returned just under 230%. 

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However, despite Boohoo’s attractiveness, there’s one other company out there that looks to me to be a much better growth stock. 

Beating the market 

S&U (LSE: SUS) is a motor finance business that is still majority owned by its founding family.

According to figures from Morningstar, £100 invested in S&U’s stock at the beginning of 2008 worth be worth £1,627 today including reinvested dividends. On an annualised basis that’s a return of 36.3% per annum. An investment in Boohoo has yielded a similar performance since it came to the market at the beginning of 2014, but while shares in the fashion business currently trade at a forward P/E of 50, S&U trades at a forward earnings multiple of just 9.3. 

It would appear that the market is expecting big things from Boohoo, although the high multiple leaves plenty of room for disappointment if the predicted growth does not materialise. Meanwhile, S&U’s discounted valuation offers plenty of room for upside if the company performs better than expected. 

Beating the market 

Recently, shares in S&U have come under pressure due to concerns about rising default rates in the car finance sector. The company is not immune to these factors. It reported a slight uptake in impairments earlier this year. However, S&U’s management has been in this business a long time (and owns the majority of the shares), so it is taking action to protect the business. 

According to a year-end trading update published by the company today, S&U has tightened its lending standards over the past few months, and a new software system is expected to “lead to further growth in high-quality business, margin improvement and a gradual reversal in the recent, and historically small, uptick in impairment-to-revenue.” Customer numbers for motor finance reached a record 54,000 last year, and the number of transactions grew by 22% so it would seem S&U is not struggling for customers. 

For the full year, City analysts are expecting the company to report earnings per share growth of 18.5%, followed by an increase of 16.4% next year. The shares also support a 5.3% dividend yield, which is expected to grow in line with earnings. 

Overall, considering S&U’s discount valuation and high teens growth rate, it looks to me as if the company is well placed to continue producing enormous returns for investors going forward. On the other hand, Boohoo is growing rapidly, but its high valuation does not leave much room for error. 

Still, if it can continue to win over customers, then the sky is the limit for Boohoo. The firm recently raised its full-year sales forecast for the third time after revenue doubled for the four months ended December and with more than £100m of cash on the balance sheet, the group is well capitalised to fund growth. Analysts are expecting the company to report earnings per share growth of 34% for 2018, followed by an increase of 27% for 2019, although considering its record of beating City forecasts, I would not be surprised if these figures turn out to be conservative.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended and S & U. 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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