The best growth stocks to buy with £2,000 in July

These growth stocks have doubled in the last year, but Roland Head thinks they both enjoy durable advantages and could have further to go.

| 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 two growth stocks I’m looking at today have both delivered 100% gains for shareholders over the last year. Despite these gains, I think both shares could keep rising over the next few years.

A long-term tech winner?

My first pick is Calnex Solutions (LSE: CLX). This Scottish technology business makes specialist testing and measurement equipment for telecoms networks. Calnex was founded by chief executive Tommy Cook in 2006 and floated on London’s AIM market in October 2020.

Cook retains a 21% shareholding, so his interests should be well-aligned with those of shareholders.

I’m normally quite cautious about newly-floated businesses. But I’ve been impressed by what I’ve learned about Calnex so far. I think this growth stock could be a long-term winner.

Firstly, I think demand for the company’s network emulation and network synchronisation should continue to grow for the foreseeable future. Management says that 5G and cloud computing are driving “growth in the need for test and measurement” solutions. I don’t see this trend changing anytime soon.

The other reason why I like Calnex is that it’s already highly profitable and well financed. Results for the 12 months to 31 March showed revenue jumped 31% to £18m, with pre-tax profit up 22% to £3.6m. Calnex generated an operating profit margin of 21% during the year and reported net cash of £12.7m at the end of March.

Of course, Calnex isn’t a sure thing. With a market-cap of £85m, this is still a small company that’s new to the market. My main worry is that the company’s strong growth may slow. Analysts are expecting profits to be much flatter this year before returning to growth in 2022. But there’s no guarantee of this.

Even so, I like what I’ve seen of Calnex. The price tag of 25 times forecast earnings doesn’t seem too high to me for a growing company, with profit margins of more than 20%.

This is a stock I’d buy today and tuck away for a few years.

A growth stock with a moat?

My second company is construction materials group Sigmaroc (LSE: SRC). This may not sound like a classic growth situation, but hear me out.

Sigmaroc’s focus is on buying established local companies which already have a good share of their local market. Examples include stone quarries and concrete and block manufacturers. Products like this are generally made and sold as locally as possible, because they’re heavy but cheap. This means long-distance transport adds a lot to the cost of the item, giving locally-produced alternatives an inbuilt advantage.

Sigmaroc’s revenue rose 77% to £124.2m last year, thanks to continued growth and acquisitions. Underlying pre-tax profit for the year rose 45% to £12.2m.

The main risk I can see is that ‘buy-and-build’ models — where a company uses regular acquisitions to expand — can be risky. An economic slump could also hit demand from the construction trade.

No growth stock is without risk, but Sigmaroc’s a business I’d be happy to keep buying. Although the shares look pricey on 20 times 2021 forecast earnings, the company’s latest trading update reported continued like-for-like growth. I think this is a business that could get much bigger.

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.

Roland Head 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

Black father holding daughter in a field of cows
Investing Articles

A FTSE 100 share that could create generational wealth

Investing in FTSE shares can help individuals pass down a significant chunk of cash to their children and grandchildren, data…

Read more »

Investing Articles

Here’s what the BT share price could mean for passive income investors

The BT share price has been falling for years, but that might be about to change. And dividends could be…

Read more »

Investing Articles

At £4.76, is the Aviva share price a steal? Here’s what the charts say!

Aviva has outperformed the Footsie over the last year. But is there still value in its share price? This Fool…

Read more »

Photo of a man going through financial problems
Investing Articles

Does a 43% price drop make this undervalued UK stalwart one of the best cheap shares to buy now?

After losing a third of its value of the past five years, this might be one of the most undervalued…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

My top 3 picks today for a £20,000 Stocks and Shares ISA

Here are three very different investments to consider for a Stocks and Shares ISA, covering both the UK and US…

Read more »

Businesswoman calculating finances in an office
Investing Articles

The Darktrace share price has been surging — and it could climb higher

I think the Darktrace share price could have more room to run. Despite the competitive AI industry, the firm looks…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

With its 7% dividend, should I be watching the Aviva share price?

Dividend investors will struggle to find many companies with a yield above 7%, so should the Aviva share price be…

Read more »

Investing Articles

Could this be one of the FTSE 100’s best cheap dividend shares?

Looking for the best dividend growth shares to buy? Our writer Royston Wild thinks this FTSE 100 housebuilder might well…

Read more »