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2 fast-rising growth stocks worth a second look

Over the past 12 months, shares in SSP Group (LSE: SSPG) have risen 62% excluding dividends, outperforming the FTSE 100 by around 51%. And after this performance, the shares look as if they can head higher as the company continues to expand its offering across Europe.

Captive audience 

SSP, which owns and maintains food and beverage outlets in stations and airports around Europe, announced its results for its fiscal third quarter today, declaring that revenue for the three months to the end of June rose 15% year-on-year at constant currency. Sales growth was primarily driven by new store openings as like-for-like sales growth came in at 3.6%. At actual exchange rates, the company benefitted significantly from the weaker pound, which led to a 22% year-on-year rise in revenue. For the first nine months of the financial year, the company saw revenue rise 10% at constant currency.

Commenting on today’s numbers management said: “Looking forward, whilst a degree of uncertainty always exists around passenger numbers in the short term, particularly in the current environment, we are well placed to continue to benefit from the structural growth opportunities in our markets and to create further shareholder value.” 

Even though SSP may fall under the radar of most investors, creating value is what the group does best. Over the past five years shares in the company have outperformed the FTSE 100 by more than 110% excluding dividends. And for the financial year ending 30 September 2017, City analysts expect earnings per share growth of 19%. Growth of 9% is expected for the next fiscal year.

Unfortunately, as shares in SSP have exploded higher over the past 12 months they currently trade at a relatively demanding multiple of 26.2 times forward earnings, falling to 24.1 times earnings for fiscal 2018. Even though this multiple might seem expensive, the company is well placed to continue growing. It has a captive customer base in stations and airports, and the company can use this to its advantage as the rest of the retail industry struggles. Growth in air passenger numbers, as well as price rises, should continue to offer opportunities.

Dirt cheap growth 

Debt servicing company Arrow Global (LSE: ARW) has also seen its shares rally higher over the past 12 months. Arrow has added 95% since July last year, and it looks as if the shares could double again based on current growth forecasts. The City is expecting Arrow to report earnings per share growth of 28% for 2017 and 25% for 2018. 

Despite these lofty projections, the shares are only trading at a forward P/E of 12.2, falling to 9.6 for 2018. Put simply, if you’re looking for a dirt cheap growth stock that is expected to grow rapidly in the years ahead, Arrow looks to be a great option. According to my figures, based on the estimates above, shares in the company are trading at a PEG ratio of 0.4. A PEG ratio of less than one implies that the shares offer growth at a reasonable price. 

Hidden growth champions 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of SSP Group. 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.