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2 stunning growth stocks you might regret not buying

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Today I’m looking at two stocks which have already delivered spectacular gains for investors, but that still have strong growth credentials.

My first stock has risen by 211% over the last 10 years. Animal genetics company Genus (LSE: GNS) released its half-year results today, giving us a chance to see whether this momentum is being maintained.

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Double-digit gains

Revenue at the Basingstoke-based firm — which breeds genetically-modified pigs and cows — rose by 7% to £238.6m during the six months to 31 December. Adjusted operating profit including joint ventures rose by 18% to £31.5m, implying a respectable adjusted operating margin of 13.3%.

Cash generated by operations improved, rising to £22m. That’s nearly double the £13.5m generated during the same period in 2016. The interim dividend was increased by 9.5% to 8.1p, reflecting higher profits and stronger cash flow.

These figures all seemed fairly positive to me, but they weren’t enough to stop the shares falling by around 5%. Do investors need to be worried?

Headwinds could slow growth

Last year, Genus benefitted from unusually high pig prices in China. The firm says that pig prices are now “returning to a more normal level,” reducing profits from this region.

Currency movements could also put pressure on profits. Commenting today, chief executive Karim Bitar said that shifting exchange rates are expected to reduce reported profits by around £3m this year.

Broker consensus forecasts indicate that Genus is expected to report adjusted earnings of 71.5p per share for 2017/18. This is only 3% more than last year’s adjusted figure of 69.4p per share.

Although the headwinds described today sound like short-term issues to me, I’m not convinced now is the right time to buy. With the shares trading on a forecast P/E of about 30, I think there might be better buying opportunities later this year.

I’m tempted by this stock

Shares of pharmaceutical services firm Clinigen Group (LSE: CLIN) have also fallen this week following the firm’s interim results. But I’m more inclined to see this as a buying opportunity.

Clinigen specialises in providing unlicensed medicines to doctors and other healthcare professionals. These might be used in trials or to treat a patient with specific requirements. It’s a bigger business than you might think. The group ships 3.5m units for patient treatment each year to more than 111 countries. In 2017 it provided access to 1,700 unlicensed medicines.

Expansion has come through organic growth and acquisitions. Two acquisitions were made during the first half of the year, including a £143.5m deal to buy AIM-listed firm Quantum Pharma. These deals should expand its geographical footprint and its product portfolio.

This could be the right time

Sales rose by 28% to £167.8m during the six months to 31 December, while adjusted earnings rose 13% to 21.2p. Cash generated from operations rose from £7.7m to £34.3m, giving me confidence that the group should quickly be able to repay the debt used to buy Quantum.

My feeling is that after a period of major investment, Clinigen is now well positioned for further growth.

Analysts expect the group’s adjusted earnings to rise by 11.5% to 46.6p per share this year, putting the stock on a forecast P/E of 20. Earnings are expected to accelerate by a further 18% in 2018/19. I believe this stock could be a profitable growth buy at current levels.

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Roland Head has no position in any of the shares 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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