Have £1,000 to invest? Here are 2 monster growth stocks to consider

Harvey Jones reckons you could have a roaring time with these two growth monsters.

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You cannot top the excitement generated by a monster growth stock, and they don’t get more monster-ish than private healthcare operator NMC Health  (LSE: NMC). This is a 12-bagger over five years, its share price up a rampaging 1,111%.

Your good health

It is now a listed company with a market capitalisation of £8.25bn, so it would be unrealistic to expect another blast of 12-baggery, although it still has lots of momentum, rising 48% in the past 12 months alone. However, it has been trumped by a smaller company, The Gym Group (LSE: GYM), which is up 56% in the last year and today reported a strong first half with “growth across all key metrics”. My Foolish colleague Edward Sheldon predicted its success in January

The Gym Group, which runs 147 low-cost, no-contract gyms across the UK, reported a 36.1% rise in revenues to £58.3m, while group adjusted EBITDA rose 28% to £17.5m. That sounds good, but the stock actually fell around 2% on the news, as margins dipped from 32% to 30.1% year-on-year, reflecting immature estate profile and Lifestyle conversions”.

easyGym does it

Statutory profit before tax fell 14.4% to £5.1m, but that was down to an increase in exceptional costs to £1m, primarily relating to the acquisition of easyGym. Adjusted earnings per share (EPS) rose 7.8% to 4.2p, while the interim dividend went from 0.3p to 0.35p, a 16.7% increase.

So why are investors in a sweat? The £437m company trades at a pricey forward valuation of 34.5 times earnings, and at that hefty valuation, any interruption to the growth story is bound to jangle nerves. However, EPS projections look promising, with City analysts pencilling in 25% growth this year, and 37% in 2019. That should shrink the P/E to a more amenable 24.3 times earnings. The yield is just 0.5% but with cover of six, there is plenty of scope for progression.

The Gym Group continues to acquire new sites and is setting up a personal trainer programme, and although there are limits to growth with consumer pockets stretched at the moment, it looks in good shape.

Strong medicine

NMC Health issued its own half-year report and business update earlier this month to a much warmer welcome, with the stock bouncing 6% once investors had digested the numbers, which included a 20% rise in revenues and 30% increase in adjusted EPS.

Although it is London-listed it has little exposure to the flatlining UK private healthcare market, but instead focuses on the Gulf Cooperation Council (GCC), with an international reach that sees its doctors treat 8.5m patients across the UK, Spain, Italy, Denmark, Slovakia, Egypt, Brazil and Colombia.

Plenty of bite

Four years of double-digit EPS growth are expected to continue this year and next, with impressive projections of 35% in 2018 and 29% in 2019. NMC currently trades at an intimidating 48.7 times earnings but that strong anticipated growth should whittle it down to 27.5 times next year.

The forecast yield may be low at 0.5% but cover of 5.3 offers scope for progression, with management promising to be generous, with a policy of paying out 20%-30% of after-tax profits.

I think both these monsters may continue to roar.

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 recommended NMC Health and The Gym 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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