3 of the best growth stocks of 2018 (so far)

Royston Wild runs the rule over three stocks whose share prices have detonated in 2018. Can they keep climbing?

| 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.

Looking for top growth stocks to buy today? Well I reckon the three shares described below are set to add to the colossal gains they have already racked up so far in 2018.

Softcat

A 54% share price rise has made Softcat (LSE: SCT) one of London’s biggest winners in the year to date.

A slew of perky trading statements has kept the FTSE 250 software business well bought in recent months, its latest market update this month revealing that the company expects full-year profits to bash through its prior projections. Softcat said that “market conditions have been very favourable,” and added that “growth against [the] prior year has accelerated” since last updating investors at the end of May.

City analysts are expecting the Neil Woodford favourite to follow earnings growth of 33% in the year to July 2018 with an extra 6% rise in the upcoming fiscal year. I can see fiscal 2019’s estimates receiving hefty upgrades as we move through the rest of the year and into the next, taking the edge off a conventionally-expensive forward P/E ratio of 27 times.

Dechra Pharmaceuticals

It isn’t a surprise to see Dechra Pharmaceuticals (LSE: DPH) take off in 2018, either, its share price storming 43% higher since the turn of the year.

The FTSE 250 company, which provides pharmaceutical products for companion and farm animals, has continued peppering the market with a steady stream of positive trading updates, the last of which this month revealed a 14% increase in group revenues (at constant currencies) in the 12 months to June.

Dechra Pharmaceuticals’ acquisition-led growth strategy which has boosted its product pipeline and geographic footprint has proven integral in sending profits skywards in recent years. And so news of further significant acquisitions in January, i.e. those of Netherlands-based AST Farma and Le Vet, have been greeted with fanfare by the investment community.

Indeed, City analysts have been upgrading their forecasts in recent months and an 18% earnings jump is currently forecast for fiscal 2019, matching the expected increase for last year (results are due on September 3).

A forward P/E ratio of 33.2 times may be expensive on paper, but I don’t see this as an obstacle to further stock price gains in the weeks and months ahead.

Homeserve

I also reckon Homeserve (LSE: HSV) should continue the exceptional share price run that has seen it gain 25% in value since the turn of the year.

The home emergency specialist didn’t get off to an auspicious start in 2018 but investor appetite came alive following a blockbuster trading update in May in which it announced that sales jumped 15% in the year to March, a result that pushed pre-tax profit up by a quarter. As a consequence Homeserve decided to hike the annual dividend by 25% too.

The newsflow has remained positive since then, the FTSE 250 firm reiterating its prediction of “continued strong organic growth” in North America last week, with recent acquisitions likely to give sales at group level an extra leg-up.

With revenues exploding across all of the company’s territories, the City expects earnings to jump 9% in fiscal 2019 and 11% in the following year. In my opinion Homeserve’s rising might across the globe makes it worthy of its premium valuation, a forward P/E multiple of 27.2 times.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

After crashing 50%, is now the perfect time to buy this world-class FTSE 250 share?

The worst-performing share on the FTSE 250 over the last year is also the most exciting one of all. How…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: July’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

Is this one of the FTSE 100’s best-value growth shares?

Looking for great-value recovery shares to buy today? Based on City forecasts, this could be one of the best that…

Read more »

Investing Articles

Will the Tesco share price hit a 10-year high in 2024?

Up from 200p less than two years ago, the Tesco share price has enjoyed impressive growth lately. Now I'm considering…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Nearing its 12-year low, this FTSE growth stock could be the bargain of the year!

Harvey Jones has happy memories of owning this FTSE 100 growth stock. Now he's wondering whether to take a trip…

Read more »

Investing Articles

BT share price: a bargain or one to avoid?

This Fool has been keeping tabs on the BT share price. Despite looking cheap, he's steering clear of the stock…

Read more »

Electric cars charging in station
Investing Articles

Where will Tesla stock be in 5 years? Here’s what the experts say

The analysts' outlook for Tesla stock in the next few years seems to be all over the place, as the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

3 reasons why I predict UK shares will soar over the next 12 months!

Our writer believes there are plenty of reasons why UK shares will do well over the next year or so.…

Read more »