2 top growth stocks I’d buy in February

In his early 90s best-selling book Beating The Street, investing legend Peter Lynch regularly discusses his favourite method of stock research – heading down to the mall to assess which businesses are thriving. While this kind of research may seem old-fashioned in the digital age, I believe there’s still a lot to be said for this kind of hands-on approach when it comes to assessing the popularity of a company’s product or service.

Strong momentum

That brings me to cinema operator Cineworld Group (LSE: CINE). If you’d asked me five years ago whether the cinema would still be popular today, I would have argued that attendance would be declining, given disruptive technologies such as Netflix and Amazon Prime. However, that simply doesn’t seem to be the case and I was impressed to see recently, on visiting a London Cineworld on a Friday night, that every single seat in the cinema was occupied.

Cineworld is flying high at the moment, filling more than 100m seats for the first time last year and reporting a revenue increase of 8.3% on a constant currency basis for FY2016. The company’s growing presence in Eastern Europe really looks to be paying dividends, with revenue and earnings growing significantly in recent years.

On a forward P/E ratio of 19, Cineworld isn’t in bargain territory, but with a big slate of films set for 2017, including Beauty And The Beast, The LEGO Batman Movie and Star Wars: Episode VIII, I reckon the company’s momentum will continue. Furthermore, according to the Cineworld CFO, there’s little correlation between the state of the economy and admission sales, so even if the UK does take a turn for the worse, Cineworld should hold up well.

Brokers are overwhelmingly positive on the stock, including HSBC, J.P. Morgan and Investec with price targets of 720p, 700p and 685p respectively. I share their positive stance, believing that Cineworld should continue to perform in 2017 and beyond.

Take advantage of the dip 

Whitbread (LSE: WTB) reported third-quarter results in late January and while like-for-like sales edged up 1.7%, the market wasn’t impressed. Costa Coffee sales were 4.3% higher on a like-for-like basis, while Premier Inn sales increased 1.8%, however it was the restaurant division that let the company down, with like-for-like sales declining 1.5%.

Whitbread’s share price slumped 4% on the results, however I believe any share price weakness at Whitbread should be viewed as an opportunity to buy, instead of a cause for concern.

The hospitality giant has two market-leading products in Costa Coffee and Premier Inn and with each brand having less than 10% market share, there’s plenty of room for growth. The company plans to open 3,700 new UK Premier Inn rooms this year, and expects to open 230-250 new Costa shops worldwide.

Whitbread shares now trade on a forward P/E ratio of 16.2, which seems reasonable for a company that has grown its revenues and earnings by 44% and 76% respectively over the last three years, and pays a dividend of 2.3%. As such, I rate the firm as one of the better value growth stocks in the FTSE 100 right now.

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Edward Sheldon owns shares in Whitbread. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.