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Is this new IPO the growth stock to retire on?

Since going public at the beginning of March, shares of household general merchandise supplier UP Global Sourcing (LSE: UPGS) have leapt over 30%. Of course, the question is whether the company, which sources, brands and distributes goods such as ironing boards, cookware and kettles, can continue to grow at such a rapid clip.

I believe it can because the company’s share price is largely rising in line with stellar financial progress. Indeed, in its first report since going public, interim results covering the six months to January, sales jumped a full 62% year-on-year to £68.1m and pre-tax profits rose an even more impressive 72.5% in the period.

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The key has been winning contracts to supply goods to retailers covering the value spectrum from Argos to Tesco and John Lewis. And as the company puts its products into greater numbers of stores, its margins steadily increase due to economies of scale from procurement, shipping, storage and distribution.

While margins aren’t incredibly high for the products it sources, EBITDA margins rose to 12.9% in the period and there is plenty of scope for them to expand as the company crowds out smaller competitors due to increasing financial strength and customer relationships. As it pushes these smaller rivals into financial difficulty it also opens up space for further growth through acquisition by buying up distressed brands at a discount.

It’s also reassuring to see the company is still managed by its founders, who together own around 40% of all outstanding shares. This level of insider ownership is almost always a boon for minority shareholders as it gives management a big stake in the business but not enough to run it as a private fiefdom.

With double-digit growth, a founder-led management team and healthy balance sheet with net debt at just 0.9 times EBITDA, I’m very interested in UPGS despite its shares trading at a pricey 20 times forward earnings.

Viva la revolución

One growth share trading at a more respectable valuation is Revolution Bars Group (LSE: RBG), which runs the eponymous Revolution and Revolucion de Cuba brands. The group trades at just 13.5 times forward earnings despite analysts pencilling-in expected EPS growth of 7% and 16% for the next two years.

This level of growth looks fully attainable for the company as it grew revenue by 12.7% year-on-year to £66.7m in the six months to December and increased adjusted EBITDA by 13.6%. And while adding four new sites to take the total estate to 66 accounted for much of this growth, it was good to see like-for-like sales rise 2% in the period, suggesting customers are finding the group’s bars an attractive place to spend their paycheques.

Furthermore, with such a small estate, no net debt and operations that fully cover the expense of opening new sites, there appears to be scope to continue growing for some time. For investors who aren’t put off by the cyclical nature of the restaurant business and consumers’ incredibly fickle tastes, Revolution Bars’ shares may prove a steal at their current valuation.

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Ian Pierce 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.