This stunning growth stock is up almost 80% in one year. Is there more to come?

The share price of this hot small-cap stock has been motoring ahead in recent months. This Fool asks: is it still worth buying now?

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A little under six months ago, I suggested it wasn’t time to sell stock in advanced testing systems designer, manufacturer and supplier AB Dynamics (LSE: ABDP) just yet, despite the solid gains it had already made.

Those who stuck with the shares would have reaped the rewards. A week ago, the price climbed to 1880p — translating to a gain of 33% since last October.

While political instability has no doubt contributed to bringing the price back down over the last few days, few of those investing a year ago would claim they’ve been hard done by. AB’s shares are still up almost 80% in the last 12 months alone.

Today, the company released another reassuringly positive trading update. Thanks to “growing market demand and the positive impact of planned operational improvements,” revenue and adjusted operating profits for the first half (to the end of February) are now predicted to be “significantly ahead” of last year when they’re officially revealed on 24 April.  

Additionally, the company is “confident” its full-year numbers will be in line with what analysts (and management) were expecting. 

It’s clear the huge interest in autonomous driving and associated technology has brought many companies to AB’s door for its track-testing products and simulation systems. Interestingly, an updated strategy on the future direction of the business will also be issued next month.

Despite this, there are a couple of reasons to be cautious. First, the shares still trade on a frothy 34 times forecast earnings. Even for a company with such great growth opportunities, that’s expensive, and arguably goes against the Warren Buffett mantra of buying great businesses at reasonable prices. There’s also the threat that an unsatisfactory resolution to the Brexit crisis could see many growth stocks hammered as investors head for the exits.

Second, there have been a number of director sales recently. Although these transactions can be for a variety of reasons, I prefer to see senior management adding to their holdings, not the other way around. 

In sum, I still continue to rate AB Dynamics. That said, anyone considering buying in now shouldn’t be blind to the fact that ongoing positive momentum can never be guaranteed on any investment.

Growth on the cheap

If you’re looking for companies favoured by the market but aren’t comfortable with purchasing highly-rated shares lower down the market spectrum, perhaps JD Sports Fashion (LSE: JD) might appeal.

Despite rising 36% in value since the start of 2019, the FTSE 250 constituent is still available on less than 16 times expected earnings. Dividends are negligible (a forecast yield of just 0.4%), but that’s not a bad thing given the high returns management consistently achieve on the money fed back into the business. 

JD releases its latest set of full-year numbers on 16 April. Since its post-Christmas trading update (which I covered here) was so positive, I’d be surprised if there’s anything negative to report numbers-wise.

We should also get an update on the recent purchase of Footasylum. Although time will tell whether the “significant operational and strategic benefits” JD believes the acquisition will bring actually materialise, it’s telling that the market appears satisfied with the deal.

At a time when so many retailers are struggling, I remain confident JD is still worth backing.

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.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended AB Dynamics. 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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