2 under-the-radar growth stocks I’ll be watching in March

Paul Summers picks out two less well-known UK growth stocks that he’ll be paying attention to next month.

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Companies receiving the least coverage by analysts can often generate some of the best returns for investors. With this in mind, here are two under-the-radar UK growth stocks (one of which I already own!) that I’ll be paying particular attention to in March.

Multi-bagging growth stock

With a market cap of £1.4bn, international research and data analystics firm YouGov (LSE: YOU) isn’t exactly the market’s best-kept secret. However, nor is it a company that frequently hits the headlines. As a long-term Foolish investor, that piques my interest, especially when looking at the performance of the shares. 

In the last five years, YouGov’s valuation has jumped almost 400%! This goes some way to explaining why I have a good proportion of my money invested lower down the market spectrum. Picked carefully, the potential upside is greater since it’s theoretically easier for relative minnows — like YouGov once was — to grow revenue and profits at a faster clip. Indeed, it’s why I’ve been buying this investment trust in February.

Momentum reverses

Like many growth stocks, however, YouGov hasn’t fared so well in 2022, dropping 20%. That’s perhaps to be expected given recent global events and the stock’s still-eye-watering valuation of 47 times forecast earnings. To pay this price, I’d expect the company to be blowing analyst projections out of the water. However, management recently stated that growth would likely be only “slightly ahead” of its own forecasts. That’s hardly a bad thing but it’s clearly not been enough for some investors to stick around.

All this brings to light a key risk with buying high-performing investments; the bar for what is considered successful trading is set so much higher. Since no company is capable of executing perfectly, the potential to disappoint is greater.

Interim results from YouGov are due on 22 March. If the share price drops further, I might have to consider adding the stock to my own portfolio. In spite of the high valuation, this looks to be a very decent company with great geographical diversification and a robust sales pipeline. It’s also worth pointing out that YouGov has consistently hiked its annual dividend by double digits for many years now. That’s never a bad sign. 

Off the boil

Kettle safety device-maker Strix (LSE: KETL) is another under-the-radar, AIM-listed stock that’s done well for early holders such as myself. Between March 2020 and September last year, the share price increased roughly 185%! No doubt some investors had become aware, like me, of the fat margins and seriously high returns on capital this company consistently achieves.

Unfortunately, recent performance hasn’t been so great, with shares falling 35% in the last six months. Like so many other businesses, Strix has faced supply chain issues and higher freight costs. Today’s news of a “cyber incident of Russian origin” won’t exactly boost sentiment either. That said, the company has already stated that there’s been “no impact on customer orders or sales“.

Speaking of which, the £500m cap business recently said that it would log revenue growth of around 30% for 2021. Pre-tax profit has also been in line with market expectations. Numbers will be officially confirmed on 30 March.

With the shares now trading at 15 times earnings and a new factory in China effectively doubling manufacturing capacity, I may well increase my stake in the near future.

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 owns shares in Strix. 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.

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