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2 growth stocks I’d buy in August

International recruitment consultancy Pagegroup (LSE: PAGE) delivered decent interim results today but sounded a note of caution with regard to the outlook. The directors expect political and macroeconomic uncertainties to continue through 2017 but say they will continue to focus on driving profitable growth.”

Climbing a wall of worry

The ‘political and macroeconomic uncertainties’ insertion is becoming stock to many firms’ reports these days and I reckon that’s because nobody knows what’s coming, but many people seem to expect something negative is on its way.

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However, the trading environment was like that during the first six months of 2017 and Pagegroup is reporting revenue at constant currency rates up almost 8% compared to a year ago with earnings per share elevating by 21.3%. That’s a tidy performance and the directors pushed the interim dividend up 4% to celebrate, as well as declaring the third in a line of special dividends, which at today’s share price around 500p, adds just over an extra 2.5% to the overall yield this year.

The shares are up around 72% since dipping with other cyclical company shares last summer. I think that momentum can continue, and City analysts following the firm predict earnings moving up 13% this year and 7% during 2018. The company is trading well and I’d be a cautious buyer and a quick seller if conditions deteriorate or if operational and share price momentum changes direction.

Expanding fast

Meanwhile, international cinema chain operator Cineworld Group (LSE: CINE) also operates a cyclical business but is expanding fast. This morning’s interim results report from the firm shows constant currency revenue inflating by 12.4% compared to a year ago and adjusted diluted earnings per share shooting up 21.3%. The directors hiked the interim dividend by 15.4% to celebrate.

The pace of growth is strong, and highlights in the period include the acquisition of a 16-screen site in Newcastle and the opening of a six-screen site in Ely and of a 12-screen site in Zichron, Israel. Admissions grew by 10% to 50.7m in the period, which gives some idea of the size of the operation and represents a lot of trips to the cinema!

However, there’s more to look forward to with the firm targeting 11 more site openings in the second half of 2017. There’s also a refurbishment programme in full swing aimed at enhancing the customer experience with the latest audio and visual technology to keep punters coming back for more.

More to play for

City analysts expect earnings to advance 8% this year and 8% during 2018 too, which suggests that growth is still worth playing for. Indeed, the shares look perky today and the valuation remains within the bounds of what seems acceptable for growth companies that are actually growing.

Today’s 721p share price throws up a forward price-to-earnings ratio just over 17 for 2018 and there is a forward dividend yield running a little over 3%. I think there could be more to come for shareholders here with a rise above what looks like a period of consolidation on the chart. That said, as a holder, I’d keep a keen eye open for deterioration in the macroeconomic environment because of the cyclical element to the business. 

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Kevin Godbold 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.

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