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2 momentum stocks with excellent growth potential

Horizon Discovery (LSE: HZD) has been a pretty impressive performer in recent sessions, its share value rising 7% in the days to the run-up to today’s half-year report. But investor appetite has failed to carry through on the back of the numbers, the stock last dealing fractionally lower in Tuesday’s session.

But I for one am pretty darn chipper over the pharma play’s investment outlook, even if the market remains less than convinced.

Horizon Discovery announced that group revenues soared 19% during the six months to June, to £12.1m. Sales at its Products division increased 10% year-on-year to £5.3m, while over at Services, revenues leapt 30% to £6.8m.

On top of this, the gene editing specialist expects to gobble up future R&D milestones of up to £208m plus future product royalties from its Research Biotech arm, it said.

For the full fiscal year, Horizon Discovery expects the historical second half weighting (around 60% of sales are sourced during July-December), combined with its strong order book, to help generate organic revenues of between £30m and £33m.

The right medicine

It should come as no surprise that Darrin Disley, chief executive of Horizon, took a cheery tone on the back of the results, commenting: “We are very pleased with our progress in the first half of 2017, delivering consistent strong growth as the business continues to scale, and significant margin improvements as steps taken in 2016 to improve operational efficiencies bear fruit.” Gross margins expanded to 64% in the first half from 48% a year earlier.

And Disley lauded the recent $85m acquisition of Dharmacon in particular, saying that the move will “[create] a business which is the global leader in the application of both gene modulation and gene editing technologies.”

The City certainly believes in its hot revenues outlook and expects the business to end its long run of losses from next year onwards. It is predicted to flip from a loss of 3.7p per share in 2017 to earnings of 0.5p in 2018.

A forward P/E ratio of 478 times for next year may be unappealing for many investors. But for patient share selectors, this heady paper valuation may be worth swallowing for the prospect of blockbuster earnings growth in the years ahead.

Bet on this beauty?

GVC Holdings (LSE: GVC) is another London stock predicted to switch back into the black pretty soon.

In 2017 the abacus bashers are anticipating earnings of 62.4 euro cents per share, moving from the losses of 51 cents last year. And a further improvement, to 74.4 cents, is forecast for next year.

This shouldn’t come as a shock as the scale benefits created by the bwin.party acquisition last year, allied to its improving territorial diversification, bear fruit. Net gaming revenues at the gambling giant ripped 25% higher between January and June to €486.2m, a result that saw adjusted pre-tax profit double to €101.9m.

Despite GVC Holdings soaring 31% since the start of 2017, it still trades on a very attractive forward P/E ratio of 15.3 times. I reckon this is terrific value given the company’s colossal revenues opportunities.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended GVC Holdings. 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.