£1k to invest? I’d buy this double-your-money FTSE 250 growth stock

These two stocks are heading in two different directions and I would only buy one of them today.

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It’s nice when your stock tips pan out. Last May, I spoke glowingly about IWG (LSE: IWG), which provides serviced offices, virtual offices, meeting rooms, and videoconferencing to clients, and its stock is up a third since then, from 337p to 446p. Over 12 months, the IWG share price has almost doubled in value.

Global growth

The FTSE 250-listed company has come a long way since issuing a profit warning in 2017, and is growing rapidly in the Americas, Asia Pacific, France, Germany and Spain, although UK revenues did temporarily slip due to network rationalisation.

The £3.9bn group’s Q3 statement in November hailed “continuing strong revenue growth, excellent franchising and enterprise account momentum”. It added another 66 new locations in the quarter, taking its worldwide total to 3,348, while revenues grew 15.5% across all its centres, with strong performance in every region, including the UK this time.

Cash is flowing, it has launched a share repurchase programme, spending £22.4m in the quarter, and cut net debt further to £301.2m, putting it in a strong financial position.

After striking master franchise agreements in Japan, Taiwan and Switzerland, IWG now boasts 27 franchise partners across 22 countries. Its strong pipeline of global franchising opportunities suggests scope for further growth.

The only obvious downside I can see is that the stock trades at 35 times forward earnings, which makes it a little expensive. That means it must continue to grow rapidly to keep investors happy and the share price bubbling along. However, with earnings forecast to rise 17% this year, and 19% next, IWG still appears to have momentum on its side.

Not so hot

By contrast, education specialist Pearson Group (LSE: PSON) has endured another dismal year, and is in danger of losing its place in the FTSE 100. The stock is down 37% over the last year, and 57% measured over five years.

Last September, a profit warning sent the Pearson share price crashing 15% in a day. That came as it continued to suffer problems in its US educational business, as the shift from print to e-books hit sales, and the internet broke down barriers for entry, allowing more nimble competitors to take market share. So far, the group hasn’t come up with an answer.

Pearson has been restructuring in response, but its latest update shows educational revenue down 12%, although it is growing other areas, such as Online Program Management, Professional Certification materials, and the Pearson Test of English Academic.

I was surprised to see the group preparing a £350m share buyback. This may reward investors, but I’m a bit old-fashioned, and prefer to see companies reinvesting that kind of money back into the business, to build growth.

City analysts expect earnings to fall 19% this year and 2% next, which hardly bucks me up. You do get a yield of 3.5%, though, covered 2.5 times, while its valuation of 12.3 times forecast earnings will tempt bargain seekers. Pearson might pull it off, but I’m not rushing to buy it at the moment.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Pearson. 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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