2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

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The London market has some decent growth stocks worth considering for purchase right now as we enter April.

For example, Sage Group (LSE: SGE) has been performing well for investors over the past year. The company provides accounting, financial, human resources, and payroll services for small- and mid-sized businesses.

It’s all about increasing profits with growth stocks. So City analysts’ predictions for double-digit percentage earnings advances this year and next are reassuring.  

Further growth anticipated

In January, Sage reported a “strong” three months’ trading to 31 December 2023 with a positive outlook.

With the share price in the ballpark of 1,272p (25 March), the forward-looking earnings multiple is 31 for the trading year to September 2025. That looks like a full valuation and there’s some risk the stock may fall back if the business fails to meet its estimates.

This is a stock that has become caught up in the artificial intelligence (AI) craze, to some extent. If that proves to be a burstable bubble, shareholders could find themselves enduring a volatile ride in the coming years.

Nevertheless, the Sage business has been making steady progress for decades and it still looks attractive now.

My plan for April onwards is to watch the stock like a hawk with the aim of picking up a few of the shares if and when the uptrend pauses.

Turnaround and expansion

Meanwhile, aerospace company Melrose Industries (LSE: MRO) anticipates chunky advances in earnings ahead, and the share price has been responding well to the improved expectations.

City analysts have pencilled in a massive rebound in 2024 with earnings lifting around 270%. Then in 2025, they predict a further advance of almost 35%.

Those estimates are impressive. They’ve arisen in part because of the company’s prior long experience of turning businesses around.

Yet the remaining aerospace operations are involved in the both the civil and defence markets. So the current environment could be providing the defence division with a boost.

On top of that, the defence theme’s popular with investors. So there’s some risk the stock could weaken in the years ahead if enthusiasm for the sector cools leading to a lower valuation.

Robust operational momentum

However, on 7 March with the full-year results report, chief executive Peter Dilnot was upbeat. The company is well positioned to deliver continued growth and margin improvement supported by positive end markets and “excellent” operational momentum. Dilnot is also “confident” of unlocking “significant” further potential for the business ahead.

Meanwhile, with the share price trading around the 667p level (25 March), the forward-looking price-to-earnings ratio is just above 18 for 2025. That valuation looks fair given the level of earnings growth.

The big question is, can the firm keep up its strong progress with earnings in the years ahead?

My way of handling the uncertainty is to look for opportunities to buy a few more of the company’s shares on dips, down-days and any temporary setbacks.  

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.

Kevin Godbold has positions in Melrose Industries Plc. The Motley Fool UK has recommended Sage Group 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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