2 surging growth stocks set to beat the FTSE 100

Buying shares which have posted large gains can be a sound strategy. While it can mean a lack of potential upside due to a narrow margin of safety now being in existence, there is no guarantee that a rising share price will eventually fall. In some cases, a higher share price can indicate improving financial performance and the start of a new strategy bearing fruit. As such, it can be an opportune time to buy. With that in mind, here are two shares which have made gains but could still be worth buying.

Improving performance

Reporting on Friday was specialist producer of manual and automated diagnostic testing kits, Immunodiagnostic Systems (LSE: IDH). Its shares jumped by almost 4% following its trading update for the most recent financial year. This takes their gain for the 2017 calendar year to 47%.

The company’s automated business delivered revenues which were around 3% higher than in the prior year at constant exchange rates. It also launched four new CLIA automated assays, which brought the total assay menu with a CE-mark up to 19 assays. This represents expansion of the assay menu of 25% during the year. This and developments made elsewhere in its automated division show it is making progress with its roadmaps for R&D, sales and marketing.

In the company’s manual business, it was able to slow the downward trend. Revenues declined by 11% versus the prior year, but a focus on building the sales process and distribution channels could lead to an end to the decline in revenue at constant exchange rates.

With a sound strategy and performance which could prove to be better than anticipated, Immunodiagnostic Systems could record further share price gains. Revenue growth of 4% indicates that its shares could be a sound buy at the present time.

Growth potential

Also offering potential upside within the healthcare sector is Shire (LSE: SHP). Its combination with Baxalta has the potential to create a dominant pharmaceutical company with a pipeline of new treatments which could positively catalyse earnings growth in the long run. Furthermore, the synergies from the deal may push earnings higher and contribute to a higher valuation for the business over the medium term.

With Shire forecast to deliver a rise in its bottom line of 15% next year, the progress of the combined entity is set to be encouraging. However, many investors are somewhat unsure as to how compatible the two businesses will be, and there are doubts surrounding the level of synergies which may be recorded. As a result, the company’s shares trade on a price-to-earnings growth (PEG) ratio of only 0.7. This indicates that they offer a wide margin of safety and their upside potential could be significant.

Certainly, there are risks in the combination of any two companies. But with a strong pipeline and a low valuation, Shire looks set to deliver robust share price performance after its 115% gain in the last five years.

The best growth stock?

Despite the growth potential of Shire and Immunodiagnostic Systems, there's another stock that could be an even better buy. In fact it's been named as A Top Growth Share From The Motley Fool.

The company in question has upbeat growth prospects and yet trades on a relatively low valuation. It could boost your portfolio returns in 2017 and beyond.

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Peter Stephens has no position in any 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.