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Sales at discount retailer B&M European Value Retail (LSE: BME) rose by a healthy 19.4% to £2.4bn last year. The group’s rapid store expansion doesn’t appear to be stealing sales from older stores, either. Like-for-like sales rose by 3.1% during the year to March and B&M said it has made “an excellent start” to fiscal 2018.

Profit margins remained stable across the group, resulting in pre-tax profits rising by 18.4% to £182.9m. Adjusted earnings per share were 22% higher, at 14.9p.

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B&M opened 53 new stores in the UK last year and 19 in Germany. The company is planning a further 40-50 new UK stores for 2017/18 and 15 in Germany. The board is bullish about the firm’s growth prospects and has upgraded itsUK store target from 850 to “at least 950” stores.

Given that the group currently has 527 UK stores, the growth potential is clear. If B&M can reach its target size and then scale back capital expenditure, shareholder returns could be impressive.

The downside is that this stock is already priced for growth. It trades on a forecast P/E of 24.5 and offers a prospective yield of 1.8%. The firm’s shares haven’t moved following today’s results, suggesting that much of the good news was already in the price.

B&M shares look fully priced to me for now, but I think the firm could still deliver decent gains for shareholders on a three-to-five-year view. I certainly wouldn’t sell just yet.

A niche player with potential

Unlike B&M, Flowtech Fluidpower (LSE: FLO) isn’t a household name. It’s one of the UK’s leading suppliers of parts for hydraulic and pneumatic systems. This niche business was founded in 1983 and has become one of the main players in its sector.

Flowtech is targeting further growth through acquiring peers in related areas, thus broadening its offer without losing its in-depth focus. An oversubscribed £10m placing in March has provided funds to do this without debt levels rising too high.

Today’s AGM trading statement confirmed that management expects the company to meet current market forecasts for this year. This puts the stock on a P/E of 11 with a prospective yield of 4%.

What could go wrong?

There are a couple of risks potential investors might want to beware of. The first is that consensus earnings forecasts for the current year have been cut by 16% since January, falling from 15.6p to 13p.

So when management says it’s confident of meeting current forecasts, this seems to confirm that analysts covering the stock were right to downgrade their guidance. The second risk is that this is a fairly cyclical business. Demand for the parts sold by the firm naturally rises when conditions are strong in sectors such as manufacturing and construction. A recession could trigger a reduction in demand.

For this reason, I don’t think the stock deserves a very high valuation. However, Flowtech’s balance sheet seems reasonably strong and cash generation has been good since the group’s flotation in 2014. I can see further value here and would be happy to buy at current levels.

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Roland Head 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.