The Motley Fool

Why I’d still consider buying these top growth stocks

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.

Businessman standing in front of screen
Image source: Getty Images.

With markets resuming their upward trajectory over recent weeks, the challenge of distinguishing those companies that justify their steep valuations from those that are merely benefitting from renewed momentum has returned. Growth-focused investors have a dilemma in front of them.

But today, I’m taking a look at two businesses that I feel can be safely included within the former category and — notwithstanding black swan events — look likely to continue to power ahead in the next year.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Strong progress

Shares in small-cap fryer management service provider Filta Group (LSE: FLTA) were on fire early this morning after the company released a bullish statement on recent trading to coincide with its annual general meeting. 

The Rugby-based firm stated that it had made “strong progress” since the beginning of 2018. In addition to the sale of 17 mobile filtration units, a total of six new franchises, including one each in new markets of Germany and Canada, had started over the period. 

Elsewhere, Filta’s existing franchises and its own operations were trading in line with expectations with FiltaGMG — the company’s grease management business — making an “increasing contribution” to the market minnow’s overall performance.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were roughly 11% ahead of that achieved by this point in 2017. Once exchange rate fluctuations are taken into account, this works out at growth of 23%.

Unfortunately, Filta’s shares certainly aren’t cheap to acquire, trading as they do at a forecast 27 times earnings.

That said, a PEG ratio of 1.2 before today implies that the price isn’t absurd considering the company’s promise. Indeed, the fact that it boasted of having a “good pipeline of enquiries” from potential franchisees in both Europe and North America certainly bodes well for the rest of the year.

Its line of work may be unappealing but I think that Filta will continue to perform for its owners.

Golden opportunity

Another growth stock I’d consider at the current time would be holiday purveyor On the Beach (LSE: OTB).

Recent interim results were more than satisfactory, in my view, with group revenue rising 19% to £45.3m. Adjusted pre-tax profit came in at £14m — 15% higher than over the same period in 2017.  This was a particularly impressive performance when you consider that the collapse of Monarch airlines led to an increase in seat prices and — for On the Beach — “a corresponding reduction in bookings“.

Despite management’s confidence in being able to meet expectations for the full year, the share price has fallen almost 30% since the numbers were announced. When you consider that the very same shares changed hands for below 200p shortly after the EU referendum, it’s perhaps understandable that some early investors are banking profits. Even so, this seems like a serious overreaction to a fairly rare event.

Right now, a forecast price-to-earnings (P/E) ratio of 22 seems fair considering the progress the company is making in grabbing market share and expanding overseas. The number of daily unique visitors rose almost 24% over the reporting period (to 34.1m) and its decision to branch into Denmark — its third international market — should reap returns over the medium-term. What’s more, a PEG ratio of under 1 suggests all this growth still isn’t fully appreciated by the market.

Having been the victim of nervous sellers over the last few months. I suspect now might be a great opportunity for patient, new investors to begin building a position.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Paul Summers 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.