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2 multi-bagging growth stocks I’d buy for 2018

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It can be hard plucking up the courage to invest in a stock that has already multi-bagged, but sometimes they just keep going up.

Shares in Clinigen Group (LSE: CLIN) have more than four-bagged over the past five years, as earnings have been growing in double-digits every year. The year to June 2017 brought in a 25% rise, and analysts are predicting 13% this year followed by 19% next.

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I was happy to read the company’s first-half trading update on Wednesday, which told us that the first half has been “in line with the board’s expectations.” Revenues are up by around 28%, with gross profit up by about 10% — the latter is, apparently, the board’s preferred measure of top-line growth.

So I was surprised to see the share price down by 3% at the time of writing, to 1,003p. But I guess that’s part of the fickleness of a high-flying growth stock, which can falter when figures fail to beat expectations.

Excellent growth

The highlight was the company’s Commercial Medicines division, which apparently accounts for 49% of gross profit, and which “delivered excellent growth, with all products across the portfolio performing strongly.

Unlicensed Medicines, representing 41% of gross profit, seems to have had a mixed time, but “a significant number of new programmes now starting” are expected to boost performance in the second half.

The Clinical Trial Services business, with 10% of gross profit, saw its performance fall back from last year’s, and that might also have contributed to the morning’s sell-off. But Clinigen says it should do better in the second half.

On current growth forecasts we’re looking at a forward P/E of 21 for June 2018, dropping to 18 on 2019 expectations. Dividends are currently yielding only around 0.5%, but they’re very well covered and strongly progressive.

And even though the share price has already climbed, I’m still seeing an attractive long-term valuation here.

10-bagger

Shares in JD Sports Fashion (LSE: JD) have done even better, 10-bagging in five years. And even after that, with the shares at 390p, we’re still only looking at forward P/E multiples of 13 to 15, which is around the FTSE 100‘s long-term average.

Admittedly there’s not much in the way of dividend cash right now, with yields similar to Clinigen’s 0.5% level. But we’re looking at cover of around 14 times by earnings, and I can see the company morphing into a solid cash cow in future years.

Tuesday’s update which covered the Christmas trading period impressed me, especially when so many other retailers have been feeling the high-street pinch. And instead of falling earnings that some are now predicting, JD has upped its full-year pre-tax profit guidance to £300m, ahead of the market’s £270m-£295m prior consensus.

Online business is expanding too, and I’m becoming more and more convinced that the retail future will belong to companies that combine internet sales with physical stores — the demand for the ability to collect and/or return goods in-store is growing.

Though I don’t pay much attention to share price charts, I am drawn to the fact that JD shares are still significantly below their May 2017 peak of over 450p — I thought the shares were fair value then, and now I reckon I’m seeing a bargain. The year ends 31 January, with results due 17 April.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Clinigen. 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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