2 red-hot UK growth stocks I might buy today

I think these UK stocks could experience serious capital appreciation during the next 10 years. Here’s why I’d add them to my growth portfolio.

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I’m searching for the most exciting UK growth stocks to add to my portfolio in 2023. Here are two whose share prices could explode over the next decade.

Kainos Group

Artificial intelligence (AI) is gearing up to be the next hot technology trend. As machines become smarter, the potential for businesses is huge as tasks are done more quickly and efficiently and at much lower cost than ‘flesh and bone’ workers.

Kainos Group (LSE:KNOS) is one AI stock that I’m considering buying today. It may lack the colossal R&D budgets of say a US industry giant like a Microsoft, Meta or Alphabet. But the pace at which it’s winning business is highly encouraging.

Revenues soared 26% during the six months to November. And last month, the FTSE 250 firm said trading had remained “very strong across all three divisions as new and existing clients have maintained high levels of investment in digital solutions”.

Kainos is expanding rapidly to maximise its sales opportunities too. Its headcount jumped 11% year on year as of mid-April to a shade below 3,000.

City analysts are expecting the company to enjoy solid earnings growth of 10% in 2023. And they believe the bottom line will keep increasing around that level (rises of 9% and 11% are slated for 2024 and 2025 respectively).

Investors need to consider rising concern over AI however, and how this could impact Kainos’ operations. Last week, the UK’s competition watchdog launched a review to look at issues like the safety, security and accountability of machine-led thinking.

That said, public scepticism follows the mass adoption of any new technologies. On balance, I think the potential for significant capital gains make the AI specialist a top buy.

Prudential

Prudential’s (LSE:PRU) a FTSE 100 share I already own in my portfolio. I believe earnings here could soar over the next decade as rising wealth levels in emerging markets boost demand for financial products.

Chief executive Anil Wadhwani has claimed the company is in great shape “to meet the growing health, protection and savings needs of our customers in Asia and Africa”. It seems City analysts agree.

Current forecasts suggest annual earnings will rise 42% as its key Asian marketplaces reopen following Covid lockdowns. And they expect the business to keep up the strong momentum and increase earnings 15% and 14% in 2024 and 2025 respectively.

The markets in which The Pru operates have low levels of product penetration. This means the business has much greater scope to grow profits than insurers who operate in more mature North American and European territories.

It’s true that Prudential faces intense competition in its markets. But I believe a forward price-to-earnings (P/E) ratio of 8.1 times fails to reflect its excellent growth potential. I’ll be looking to increase my holdings when I have spare cash to invest.

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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Royston Wild has positions in Prudential Plc. The Motley Fool UK has recommended Alphabet, Kainos Group Plc, Meta Platforms, Microsoft, and Prudential Plc. 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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