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2 top growth stocks you can’t afford to ignore

While some retailers are struggling for customers, others can seemingly do no wrong. Here are two examples of the latter, both of whom look set for even better times ahead.

Momentum star

Shares in sports, fashion and outdoor brands retailer JD Sports (LSE: JD) simply refuse to change direction. Since beginning their sharp ascent almost exactly two years ago, stock in the £3.7bn cap has climbed over 300% from 95p to 381p. Even last year’s negative publicity surrounding questionable working practices at its Rochdale warehouse wasn’t enough to shake investors’ conviction. A quick scan of recent announcements and it’s not hard to see why.

When it last updated the market in January, the Bury-based business reported that positive trading had continued during the second half of 2016 with like-for-like sales growth being maintained at roughly 10% across all group fascias (including Europe). Given the huge growth already achieved by the company over the last three years, that’s quite something.

More recently, the company announced that it had agreed a Memorandum of Understanding to combine its existing businesses in Spain and Portugal (JD Sprinter Holdings) with the Sport Zone business of Sonae — one of the largest sports retailers in the region. With a combined turnover of around €450m and a 287-store estate, it’s hoped that the newly-created Iberian Sports Retail Group will “generate further scale, momentum and resources” to continue JD’s growth story.

Trading on a pricey 19 times forecast earnings, JD’s shares won’t appeal to all investors. Nevertheless, with profit before tax and exceptional items expected to “exceed” original market expectations by up to 15%, a history of generating consistently high returns on capital and a cracking net cash position, it’s certainly not ludicrous to consider buying the shares before full-year results are announced on 11 April. 

More smiles ahead?

If one company can outmatch the enviable trajectory of JD Sports’ shares over the last couple of years then it’s online fashion star Boohoo.Com (LSE: BOO). Priced at 26.5p back in March 2015 following a shock profit warning, stock now change hands for just over 161p. If you had invested £5,000 in the stock at its low, you’d now be sitting on roughly £30,000.

With full-year results due on 26 April, many investors will be hoping the AIM-listed retailer can continue delivering the goods. Based on the its last trading update at the end of February, I think this could well happen.  

Back then, Boohoo’s board said that it now expected revenue growth for the previous 12 months to be “around 50%” —  an increase of previous guidance of between 46% to 48%. Management also suggested that the company was on course to deliver adjusted EBITDA margin “at the top end of previously guided range of 11% to 12%“.  

Importantly, the guidance outlined above was for Boohoo.Com and only – the latter becoming a part of the former after its 66% acquisition back in January. What investors will also be looking for is an indication of how its more recent acquisition of Nasty Gal has been progressing. Assuming this has gone well — and there’s no reason to think otherwise — I can see the stock pushing towards the £2 mark over the next few months, albeit after a brief period of profit-taking.

Gunning for growth?

Of course, the better a company performs, the more investors begin to expect from it. With high expectations comes the risk of eventual disappointment. That's why it's never a good idea to invest all your capital in just one or two stocks. 

With this in mind, if you're looking for other growth opportunities on the market, you'll definitely want to learn the identity of another top stock selected by the Motley Fool's Head of UK Investing, Mark Rogers.

Mark's thinks this top British brand's plans for rapid expansion make it one to watch over the next few years. For more information (but without obligation), just click here. His report is completely FREE to download and keep.  

Paul Summers owns shares in The Motley Fool UK has recommended We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.