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2 hot growth stocks at 52-week highs that could still be worth buying

Investment management firms are often overlooked by investors, but buying their shares can be very rewarding even if you might not be a customer for their actual services.

Gresham House (LSE: GHE) might have gone under many a stock-picker’s radar — partly, I expect, because the specialist alternative asset manager is not profitable right now.

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But it is heading towards it, with a big reduction in the pre-tax loss on the cards for the year to December 2017, followed by positive figures for next year — analysts are predicting 5.2p in earnings per share for 2018.

The company announced on Tuesday that it has acquired Hazel Capital, a “leading UK manager of new energy infrastructure” which also manages a number of energy storage systems. The total cost is £2.6m in a combination of cash and newly issued shares.

Financially solid

Hazel’s asset management business brought in an operating profit of £0.9m in its last financial year, and that should make a nice contribution towards turning Gresham’s first-half operating loss of £0.8m in the direction of profit.

That loss was down from £1.2m a year previously, and at the halfway stage the company told us it was “on track to surpass management’s trading profitability expectations.

Further progress was evident from a 50% rise in assets under management to £532m, and a doubling in asset management revenue to £2.4m. The firm also reported a strong balance sheet with £4.4m of its borrowing facility repaid, after legacy property asset Southern Gateway was sold for £7.25m. Tangible and realisable assets stood at £27.4m. 

Though the shares are around their 52-week high at 381p, I see them as good value.

Flying high

Huntsworth (LSE: HNT) is another whose shares have soared to a 52-week high this week, standing at 81.4p as I write.

The price has now doubled over the past 12 months, but that does need to be put into a longer-term perspective, as there has been a more modest gain of 73% over five years and actually a small fall over 10 years. 

Huntsworth is a global marketing agency with a focus on the healthcare sector, and the loss of some key clients in 2014 led to several years of reported re-tax losses and necessitated a major restructuring. 

But it does look like the company’s efforts are starting to pay off, and we’re now looking at a forecast pre-tax profit of £17.7m this year and earnings per share (EPS) of around 5.4p, rising to £20.3m and 6.2p respectively a year later.

Strong six months

First-half results revealed revenue up 9% to £94.2m and headline pre-tax profit up 58% to £10m — with EPS up 41%.

The 10% rise in the interim dividend marked a key milestone, based on “the strength of the group’s H1 performance and the outlook for the remainder of the year.

Dividends had remained flat at 1.75p during the rough patch after having been slashed by 50% from 2013’s 3.5p, but forecasts are now suggesting 1.9p for the current year, rising to 2.1p next. Yields would still be only around 2.5%, but it looks like the start of a progressive comeback.

Despite the share price climb, forward P/E multiples for this year and next only stand at a 15.2 and 13.2, and that gives us PEG ratios of 0.3 and 0.9.

I reckon we could be looking at a very healthy growth phase for Huntsworth now, with dividends thrown in.

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Alan Oscroft 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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