Growth stocks are the exciting, eye-catching companies that are making moves. Typically, such companies have high revenue growth year-on-year. This usually gives investors confidence that in the future, high profits will also be realised. With this concept in mind, here are a couple of my top growth stocks I’m considering buying now with £2k of spare cash.
To the moon
Moonpig (LSE:MOON) is a greetings card company, which has expanded the offering into gifting as well. The business has grown over the past few years, and went public in Q1 2021.
Its growth in revenue can be seen from the half-year results released back in December. To provide more accurate comparisons, a two-year performance was included. The half-year growth in revenue versus 2019 was 115.2%. Adjusted profit before tax was up 147% on the two-year comparison.
I think that the business is well positioned going forward. It has a dominant position in the online greetings card market. Further, I like the expansion into broader gifting ideas. This not only makes it less reliant on the cards division, but also allows it to grow at a quicker pace.
The share price is down almost 50% over a one-year period. However, I think that this was more to do with it being overpriced at the IPO stage. Even at the current level, the price-to-earnings ratio is 88. This is well above the FTSE 250 average.
Some might see this as a risk, which I do accept. Yet by the very nature of top growth stocks, it’s going to be high. Investors think that future earnings will grow, so often view the share price based on future potential, rather than current earnings.
Top growth stock in private equity
A second top growth stock that I like at the moment is Harbourvest Global Private Equity (LSE:HVPE). The share price is up 28% over the last year. This might not fit in with the traditional growth stock on the surface, but stay with me
The private equity business is all about investing in other companies that aren’t directly listed. These could be small companies needing funding to grow, almost like Dragon’s Den-style venture capital. Or it could be mature companies that are underperforming and are bought with the aim of being turned around.
So within the portfolio, there should be some exciting options for future growth prospects. This benefits me as when the value of the individual company rises, the overall Harbourvest share price should also rise.
At the moment, I’d also be buying at a discount to the net asset value. The net asset value reflects the price of all the investments owned by Harbourvest. At the moment, the share price is at a 23% discount to the NAV, based on figures from January.
The concern with this top growth stock is that private equity is inherently risky. Investing in young companies or even mature ones that are underperforming can lead to heavy losses if things don’t go to plan.
