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2 top stocks you should have bought this time last year

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Call me a masochist, but from time to time I find it fun, and a bit educational, to take a look at the best performing stocks I’ve taken a shine to but never bought for myself. Over the past year, chief among these has been independent energy supplier Yu Group (LSE: YU).

The company’s stock price has leapt an unbelievable 395% in value since this time last year, turning it into a respectably sized £170m market cap firm. And stock pickers’ enthusiasm isn’t without a basis in reality as Yu’s full year results released this morning showed revenue rising from £16.2m to £46.9m year-on-year with adjusted operating profits racing ahead from £0.2m to £3.1m.

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And far from being a one-off, Yu is well-positioned to deliver similar levels of growth in the years ahead. Management disclosed that contracted revenue for fiscal year 2018 had already topped £50m and that “revenues for FY 2018 are expected to be ahead of current market forecasts with revenues for FY 2019 significantly ahead of current market expectations.

Although the group is delivering start-up levels of growth, it’s also in a very good financial position. Net cash balances at year-end were £4.8m, of which £3.5m was set aside for hedging contracts, while operating cash flows turned from a negative £0.8m to a positive £0.5m last year. The rising benefits of scale also meant adjusted earnings per share of 17p came in well ahead of the sole analyst’s forecasts of 13.9p.

Unfortunately, the stock is now much pricier than when I last looked at it with a valuation of 72 times trailing earnings. While I believe Yu’s high levels of revenue visibility, founder-led management team and proven ability to win over customers with its very high levels of customer service give it further room to run, this valuation is simply too expensive for my taste.

Of course, that doesn’t mean in a year’s time I won’t look back and kick myself for not investing in its shares.

A captive market eqauls bumper profits

Travel food concession operator SSP Group (LSE: SSPG) has returned a more sedate 50% over the past year, but this may be even more impressive given the group has been around for years and it’s a giant with a market cap of nearly £3bn.

Part of the company’s success is down to healthy global economic growth that has led more people to travel, but the main driver has been operational improvements. For example, seemingly simple changes such as improved staff scheduling and opening outlets based on successful local restaurants have trimmed millions of pounds in annual costs and brought more customers in the door.

The success of these tweaks was clear in the company’s results for the year to September, when revenue rose 11.7% in constant currency terms to £2,379m due to like-for-like growth of 3.1% and further contract wins, especially in the massive US market it is just now breaking into. And a laser-like focus on costs led to operating profits rising a full 27% to £162m even as management invested heavily in readying stores from new contract wins.

While SSP can’t offer Yu Group levels of growth, it’s still growing profits rapidly and has plenty of room to expand, which together with a more sedate valuation of 27 times forward earnings looks much more palatable to me.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP Group. 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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