2 hot growth stocks that could fly this month

Andrew Woods explains how increased deal activity and potential demand for uranium could mean these two growth stocks soon rise in value.

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While it can be great to derive income from my investments, I take equal satisfaction in finding high-quality growth stocks. To that end, I’ve trawled the indices and found what I think are two exciting companies. Let’s take a closer look.

Rapid earnings growth

First, the Numis (LSE:NUM) share price is up 8% in the last three months. At the time of writing, the shares are trading at 259p.

For the year ended September, between 2017 and 2021, the broking firm’s earnings per share (EPS) rose from 27.4p to 54.2p. By my calculation, this results in a compound annual EPS growth rate of 14.6%. As a potential investor, I find this rate of earnings expansion extremely attractive.

Over the same period, revenue increased from £130m to £215m. What this tells me is that the business has been performing for its shareholders year in, year out.

Yet I’m always aware that this growth isn’t guaranteed in the future.

For the three months to 30 June, revenue was £40m, which was up quarter on quarter. And there was no change to full-year expectations in the report. 

However, the company stated that deal volume may decline in the event of a recession. This may lead to lower profit margins.

Nevertheless, the investment banking segment has enjoyed improved performance and there’s a strong future pipeline of merger and acquisition activity. 

Glowing financial results

Second, Yellow Cake (LSE:YCA) has seen its shares climb 13% in the last week. Currently, they’re trading at 417p.

For the year ended March, between 2019 and 2022, EPS rose from ¢39 to ¢260. This results in a compound annual EPS growth rate of 60.6%.

As a holder of physical uranium, it’s currently benefiting from the rapidly rising spot price of uranium. This may become a vital energy source in the future, as governments may plan to move away from oil and gas. 

There’s the risk, however, that countries look to renewables and bypass uranium, which could be bad news for the business.

Assuming it does have a strong future, for the three months to 30 June, the firm added 3m pounds of uranium to its holding and embarked on a $3m share buyback scheme in April.  

Furthermore, for the 12 months to 31 March, net profit climbed to $417.3m, up from $29.9m during the same period in 2021.

Additionally, the firm saw the value of its uranium holdings increase 203% year on year. 

Overall, both of these companies display exciting rates of earnings growth. What’s more, the near future may also hold promise for both Numis and Yellow Cake, through M&A activity and moves to use uranium and nuclear power more widely. As such, I’ll add both businesses to my portfolio soon to hold for the long term. 

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.

Andrew Woods 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.

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