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2 top growth stocks I’d buy A.S.A.P.

During 2014, shares in Fenner (LSE: FENR) slumped by more than 50% as the company’s earnings crashed from a high of 30p per share to 8.4p. However, the company has quickly regained its composure and over the past 12 months, shares in the engineering group have rallied by more than 100%.

It seems as if there could be further gains on the horizon as well. Shares in the company are trading higher by 10% at the time of writing following yet another bullish trading update. 

Specifically, management revealed today that, “trading across the Group remains positive and, on the basis of the improved outlook, most notably in the medical businesses, the Board anticipates that the Group’s operating profit for the financial year ending 31 August 2017 will be comfortably ahead of its previous expectations.” Going forward, the company will also benefit from a reduced interest charge as during the period the group repaid $90m of 5.8% loan notes from cash deposits. 

Earnings upgrades 

Before today’s update, City analysts had been expecting Fenner to report earnings per share of 14.7p for the fiscal year ending 31 August 2017, on a pre-tax profit of £37.4m, but it now looks as if this forecast is out of date and the company is going to surpass city expectations. This bodes well for future growth. Analysts had been predicting earnings per share growth of 18% the fiscal year ending 31 August 2018, and it now looks as if this projection might be revised higher. Based on these projections, shares in Fenner currently look cheap compared to the growth the company is generating. 

Considering City forecasts, which we now know are out of date, and after today’s gains, the shares are trading at a forward P/E of 21.8, falling to 18.3 for the following fiscal year. A forward earnings multiple of 18.3 divided by earnings growth of 18% or more gives a PEG ratio of less than one, which signals the shares offer growth at a reasonable price.

Steady grind higher 

Over the past five years, shares in Relx (LSE: REL) have smashed the FTSE 100, producing a return of 218% excluding dividends, compared to the UK’s leading index return of 29.3%. These gains have come as the company has nearly doubled its earnings per share from 49.4p for 2012 to an estimated 81.2p for 2017. 

Compared to the market’s fast-growing internet businesses, Relx is not the market’s best growth stock. Nonetheless, the most attractive quality about the company is its predictable growth. Every year the business has managed to chalk up steady, high single-digit or double-digit earnings growth without fail and based on city forecasts, this trend is set to continue for the foreseeable future. With this being the case, the forward valuation of 20.5 times earnings does not seem to be overly demanding. 

As the firm continues to go from strength to strength, it looks as if it will continue to thrash the FTSE 100 every year.

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Rupert Hargreaves 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.