Could these 2 FTSE 250 growth stocks double your money again?

Harvey Jones reckons these two FTSE 250 (INDEXFTSE: MCX) flyers might just be able to maintain their momentum.

| 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.

The FTSE 250 contains a host of exciting growth stocks and investors can make big money if they choose well. These two have doubled investors’ money in pretty short order. Can they pull off the trick again?

Technical triumph

Specialised technical products and services company Diploma (LSE: DPLM) has climbed 120% in the past five years. It still has momentum, up 34% in the last 12 months. This includes a rise of 2.42% today, following publication of the group’s trading update which predicted a 7% rise in underlying revenues for the year ending 30 September, after adjusting for acquisitions and sterling movements.

The £1.58bn group continues to trade robustly with results on track to hit expectations, helped by operations in Europe, US, Russia and Australia, which give it global reach and diversification. It’s looking to accelerate growth through further acquisitions, completing several including Australian diagnostic business Abacus dx in April last year, which is already making a strong contribution to earnings. A couple of weeks ago it also acquired FS Cables, a UK supplier of specialist cable products, for an initial cash consideration of £17m.

Earnings growth

Its pipeline of acquisition opportunities remains healthy, today’s statement says, adding: “The Group has a robust balance sheet and a proven track record of strong cash generation.” With a forecast valuation of 24.9 times earnings this stock isn’t cheap and will have to keep growing to keep investors happy. However, earnings per share (EPS) growth has been steady for years and looks set to continue, with City analysts expecting another 5% gain in the year ending 30 September 2019.

Diploma yields just 1.9% with cover of 2.1, but my Foolish colleague Peter Stephens says investors can look forward to plenty of healthy dividend growth. However, you might want to wait until we hear more about the fate of CEO Richard Ingram, or rather former CEO, because he stepped down this morning with immediate effect. Non-executive director John Nicholas, who is filling in while the board seeks a successor, simply said the board believes a change in CEO “is in the best interests of the Company and its shareholders,” with no further explanation. Investors might want to hear more.

Cat people

While you’re waiting, why not check out IT infrastructure company Softcat (LSE: SCT), which has doubled investors money in an impressive 12 months, rather than five years. The FTSE 250 company provides workplace, datacentre, networking and security solutions, either in their premises or in the cloud, and has quickly grown into a £1.73bn company.

The growth is not confined to the share price with Softcat also offering generous dividend growth, as Royston Wild points out here. The forecast yield is currently 1.3%, but cover of 2.5 gives hope for further rapid progression, with one-off supplementary payments on top. Earnings growth looks promising, forecast 33% rise this year, followed by a more modest 6% in 2019.

Soft power

This is a company that has beaten earnings expectations before, and may do so again. Growth prospects like these don’t come cheap, however, with the stock trading at more than 30 times earnings. But with a sturdy operating model and strategy, it’s worth keeping an eye on this one.

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.

harveyj 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.

More on Investing Articles

Investing Articles

Up 14% in 2024, what’s next for the Lloyds share price?

This Fool takes a closer look at what prompted the Lloyds share price to rise this year, and offers her…

Read more »

Investing Articles

5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here's…

Read more »

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

3 growth stocks I’m desperate to buy as the FTSE 100 dips

Never waste a dip, says Harvey Jones. Three of his favourite growth stocks have fallen over the last month and…

Read more »

Investing Articles

I’d use a £10K ISA to try and generate £900 in dividends annually like this!

Christopher Ruane explains how he would invest a Stocks and Shares ISA in blue-chip companies to try and set up…

Read more »

Investing Articles

Here’s how I’d build a second income stream worth £1,228 a month by investing £10 a day!

A second income stream could come in handy later in life. This Fool explains how she’d build one by investing…

Read more »

Investing Articles

5 FTSE 250 stocks I’d buy for a lifetime of passive income

Here's why I think the FTSE 250 could be the best UK stock market index to go for in 2024…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Buy cheap FTSE shares, says HSBC

Analysts at HSBC have upgraded their rating of FTSE stocks and reckon the blue-chip UK index could carry on powering…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

It could be worth buying the dip for this FTSE 250 stock, down 7% today

Jon Smith spots a sharp drop in a FTSE 250 stock but explains why this could just be a blip…

Read more »