Two top growth stocks outside the FTSE 100

Edward Sheldon looks at two companies outside the FTSE 100 (INDEXFTSE: UKX) index that have huge potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I often stress that if you’re a growth investor, it’s important to look at investment opportunities outside the FTSE 100. While the footsie is home to plenty of world-class companies, it’s definitely a little limited in terms of growth stocks.

With that in mind, here’s a look at two top growth stocks outside the FTSE 100 that I rate highly.

GB Group

Identity theft is a massive problem for society in today’s digital world. According to fraud prevention group Cifas, last year there were 175,000 cases of identity fraud recorded in the UK, up 125% on a decade ago. That means that nearly 500 Brits had their identities stolen every single day.

One company that is benefitting from this worrying trend is identity data intelligence expert GB Group (LSE: GBG). The £800m market cap group has grown significantly in recent years and now serves over 17,000 businesses and organisations across 79 countries, helping its clients make the right decisions about their customers and employees.

GB’s FY2018 full-year results, released this morning, show that the group has significant momentum at present. For the year ended 31 March, revenue increased 37% to £119.7m including adjusted organic revenue growth of 15%, and adjusted operating profit surged 55% to £26.3m. Adjusted earnings per share climbed 17% to 15.3p, beating the consensus estimate figure of 13.2p. CEO Chris Clark was bullish in his assessment of the company’s outlook, commenting: “We believe there are exciting opportunities across all our sectors, in all our markets and that gives us great confidence for the future.”

Do these results make GB Group a ‘buy’? Looking at the valuation, today’s earnings figure places the stock on a trailing P/E ratio of 34. While that valuation isn’t outrageous for a company with strong growth prospects, it’s not overly cheap either. With that in mind, investors might be better off waiting for a slightly more attractive entry point before investing, in my opinion.

JD Sports Fashion

One growth stock outside the FTSE 100 that does trade at an attractive valuation right now is JD Sports Fashion (LSE: JD). The stock currently trades on a trailing P/E ratio of 15.3, which I think offers excellent value. Here’s why.

For starters, JD is a play on two of the most powerful sporting brands in the world — Nike and Adidas. Demand for these premium brands is likely to remain strong, in my view, especially with the World Cup on the horizon where the brands will be getting plenty of exposure.

JD is also a play on millennial consumers, who love their trainers and athleisure. These consumers are happy to spend a large proportion of their disposable income on such products, irrespective of economic conditions.

Furthermore, JD’s international expansion plans should drive growth going forward. Last year the group opened 56 stores across Europe, as well as a number of stores across Asia Pacific. And earlier this year, it agreed to buy The Finish Line, which has over 900 branded stores in the US. The growth potential here is significant.

JD Sports Fashion may not be as innovative a company as GB Group, but sometimes simple business models can be very effective. I rate the shares as a ‘buy.’

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.

Edward Sheldon owns shares in GB Group and JD Sports Fashion. 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.

More on Investing Articles

Young black man looking at phone while on the London Overground
Investing Articles

Investing £3.33 into an ISA every day from 22 could result in a £60,000 passive income

Millions of Britons use the Stocks and Shares ISA as a way to build wealth and generate an income. However,…

Read more »

Investing Articles

2 resurgent cheap shares that could skyrocket in 2025

Cheap shares can take our portfolios to the next level. Here, Dr James Fox highlights two stocks that appear to…

Read more »

Investing Articles

How much does an investor need in a Stocks and Shares ISA to earn £1,000 a month in passive income?

A Stocks and Shares ISA's a valuable asset for investors. Not having to pay dividend tax can be a big…

Read more »

Investing Articles

9% dividend yield! Could buying this FTSE 250 stock earn me massive passive income?

Assura looks like an outstanding stock for dividend investors to consider. But is the 9% dividend yield the passive income…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Why I think this month could be critical for the Lloyds share price!

Our writer explains why he thinks the bank's 2024 results will have a significant impact on the short-term direction of…

Read more »

British Pennies on a Pound Note
Investing Articles

This former penny share has soared 168%. Is the best yet to come?

When Christopher Ruane saw a penny share as a potential bargain last year, he was spot on. So having not…

Read more »

Mature couple at the beach
Investing Articles

£20k in an ISA? Here’s how it could generate £1 of passive income every hour — forever

With a long-term approach, Christopher Ruane explains how an investor could aim to earn a pound per hour in passive…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

FTSE shares: overpriced or still a bargain?

Christopher Ruane reckons a storming FTSE 100 performance of late doesn't tell us much about whether there are still possible…

Read more »