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These 2 growth stocks have further room to run

Vp (LSE: VP) shares surged to a new all-time high today after the company reported strong growth in earnings and revenue for its recently ended financial year.

Operating profits before amortisation rose by 18% to £37.8m for the year to 31 March, while revenue increased by 19% to £248.7m. The impressive growth was supported by improving infrastructure, housebuilding and construction markets, which more than offset continued weakness from energy and mining markets.

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Moreover, the Harrogate-based equipment rental specialist is optimistic about the future. Neil Stothard, Vp’s chief executive, said the business has “good momentum” in 2017, with growth set to be enhanced by the two acquisitions it made earlier in the year.

Notwithstanding the increased prospect of inflationary pricing pressures, the UK election and Brexit negotiations, subject to a stable economic backdrop, Vp is well positioned to deliver further progress for the business,” he added.

Looking ahead, I reckon Vp shares will act as a good proxy for the UK construction market. And as I expect to see continued growth in that market over the next few years, due to higher infrastructure spending and an increasing number of new housing starts, I’m bullish on the firm.

Although its shares are already up 16% since the start of the year, valuations remain tempting. That’s because, despite expectations of earnings growth in the mid- to high-single digits over the next two years, shares in Vp trade at just 10.9 times its expected 2018/19 earnings.

Revenue miss

Meanwhile, shares in identity data intelligence specialist GB Group (LSE: GBG) fell by as much 5% in early afternoon trading on Tuesday after the firm reported revenue growth that fell short of analysts’ expectations.

Revenue increased by 19% to £87.5m, against City forecasts of £87.7m, while adjusted operating profits rose by 27% to £17m. GB also announced a 13% increase to its proposed dividend for 2017 to 2.35p per share.

Structural growth

Despite the revenue miss, I remain positive about the exciting structural growth opportunities for the firm. GB Group provides ID verification services to companies and governments, which enables them to detect fraud, verify data and help protect the more vulnerable people in our society. And due to growing concern and awareness of cybercrime and identity fraud, there’s huge potential for the firm to cash-in on this rapidly growing market.

GB is mindful that data intelligence is a business that benefits from global scale, which explains why the firm has been making great strides in expanding its international presence. Its international revenues share rose from 26.4% last year, to 31.1%, with the firm having secured new contract wins from major blue-chip firms such as Saxo Bank A/S and Lufthansa.

Looking ahead, it intends to grow its capability with its acquisitions of IDscan and PCA Predict, and this is expected to widen cross-selling opportunities and help it to forge stronger relationships with existing customers.

GB Group seems rather expensive with shares in the company trading at 29.8 times its expected earnings in 2018/19. However, that’s to be expected for a quality structural growth play.

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Jack Tang 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.