2 growth stocks I’d buy and hold for ten years

These two growth stock look to be long term champions that you could retire on.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Growth

Image: Public domain

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Norcros (LSE: NXR), a supplier of branded showers, taps, bathroom accessories, tiles and adhesives, flies under the radar of most investors. Over the past year, shares in the company have hardly budged, despite a positive trading performance. 

Today the company published yet another set of upbeat figures. For the first half, management expects revenue to be 12% higher at £145m, up from £129m in the same period last year. UK revenue for the period was 8.4% higher than the previous year, while its South African business revenue was up 4.8% on a constant currency basis. A focus on cash flow has helped the business reduce debt from £27m to £21m year-on-year. 

Looking forward Norcros said: “Against the backdrop of challenging market conditions, our performance demonstrates the strength of our market positions and the resilience of our diversified business portfolio delivering revenue growth.

Following this robust first-half performance, the firm expects results for its fiscal year ending March 31 2018 to meet its expectations.

Slow and steady 

This is one of my favourite companies. While it may not be the fastest growing business in the world, the group has reported stable double-digit revenue and profit rises year after year. Growth has come from both acquisitions and organically. Cash generation is high with the business converting around 100% of net income to free cash flow on average for the past five years. This has enabled management to pay a lucrative dividend to investors (currently 4.4%) and pay for acquisitions. Pre-tax profit has expanded fourfold since 2013. 

As long as management can maintain this course for the next decade, investors should be well rewarded. What’s more, at current levels the shares are a steal. Despite its historical growth and cash flows, the shares currently trade at a deeply discounted 6.1 times forward earnings. 

Pricey but attractive

Scapa Group (LSE: SCPA) is at the other end of the valuation spectrum. The company, which is a global supplier of bonding solutions and manufacturer of adhesive-based products for the healthcare and industrial markets, said yesterday that group revenue, trading profits, and margins are all ahead of last year. 

For the full-year, management now expects to beat analyst projections. Analysts had been expecting earnings per share growth of 11%. Off the back of this forecast, the market has awarded the company a forward P/E of 28.8. 

Scapa has managed to increase pre-tax profits threefold in the past five years. Considering the group’s leading position in its key markets, as well as the defensive nature of the healthcare industry, I believe that the business is a great long-term buy for investors. 

The one downside, however, is Scapa’s dividend yield. At the time of writing, the shares only support a yield of 0.5%. That being said, the payout is covered more than seven times by earnings per share, leaving plenty of room for further payout growth, or special dividends. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns shares in Norcros. The Motley Fool UK has recommended Norcros. 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.

More on Investing Articles

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »