The London Stock Exchange is bursting full of innovative and exciting companies. Every so often, I like to search for high-quality stocks. I think I’ve found two hot LSE growth shares to add to my long-term portfolio. Why do I think that these two firms fit the bill? Let’s take a closer look.
Growth stock #1: Premier Foods
The first business, Premier Foods (LSE:PFD), is a supplier and manufacturer of food products. It is perhaps most famous for its Mr. Kipling brand of sweet treats. It currently trades at 119.8p
For the years ended April, between 2017 and 2021, revenue increased from £790m to £947m.
Even more impressive, however, is the growth in profit before tax. This rose tenfold from £12m to £122m.
During the same time period, earnings per share (EPS) grew from 7.2p to 11.2p.
By my calculations, this means that the company has a compound annual EPS growth rate of 9.2%. This is both strong and consistent.
Despite this solid historical growth, for the six months to 2 October 2021, profit before tax fell 2.9%, year on year, and revenue declined by 6.5%. This is an indication that issues such as wage inflation are beginning to eat into profit margins.
Nonetheless, I see this as a fundamentally short-term problem that should subside in the near future.
Indeed, profit expectations for 2022 have risen to £145m from £140m. In addition, international sales grew 33% for the 13 weeks to 1 January.
Exhibiting strong growth, this business could be a great addition to my portfolio.
Growth stock #2: AJ Bell
The second firm is investment company AJ Bell (LSE:AJB). For the years ended September, between 2018 and 2021, revenue increased markedly from £90m to £145.8m.
Furthermore, profit before tax nearly doubled from £28m to £55m. Meanwhile, EPS rose from 5.76p to 10.71p. This means AJ Bell has a compound annual EPS growth rate of 16.78%.
It should be noted, however, that past performance is not necessarily indicative of future performance.
The company has also branched out into online trading platform products, as these became increasingly popular during the pandemic. It is due to launch its commission-free trading app, Dodl, in the middle of 2022, charging 0.15% per annum.
It also grew its customer base by 27% in the three months to 31 December 2021.
In its 2021 annual results, it had 87,500 new customers and grew profits by 13%. This resulted in a 13% increase in the dividend, to 6.96p per share.
While these results are encouraging, I am unsure about AJ Bell’s ability to maintain this standard as we return to pre-pandemic normality. It currently trades at 299p.
Overall, these are two exciting LSE growth stocks. With strong earnings data, both firms are expanding in a controlled fashion. They could be excellent additions to my portfolio and I will be buying shares in both businesses soon.
