With the mood among investors being bullish at the present time, it would be unsurprising for growth stocks to deliver high returns. After all, a bull market tends to favour those companies that can offer above-average growth outlooks. Such shares can trade at premium valuations over a sustained period of time, which may mean they are able to offer index-beating performance.
With that in mind, here are two stocks which offer surprisingly strong growth prospects for the next couple of years.
Reporting on Tuesday was aquaculture health, nutrition and genetics business Benchmark (LSE: BMK). The company’s results for the year to 30 September showed that it continues to make progress with the delivery of its strategy. For example, revenue increased by 28%, rising by 13% on a like-for-like (LFL) basis. It continues to invest in a state-of-the-art production capacity in genetics and animal health, with £21.5m spent on it during the year. Additionally, £15.2m was invested in R&D over the year.
While the company’s bottom line remained in the red during the period, losses were reduced by 61%. Looking ahead to the current financial year, Benchmark is expected to return to profitability. It is then forecast to record a rise in earnings of 90% in the next financial year. This could improve investor sentiment over the medium term. With the company trading on a price-to-earnings growth (PEG) ratio of just 0.5, it seems as though sentiment has scope to improve significantly in future.
Certainly, the stock remains relatively high-risk and is still not yet a profitable entity. Therefore, in the near term it would be unsurprising for its share price to be volatile. But with a bright set of forecasts, its price could deliver high capital growth over the medium term.
Consistent growth prospects
Also offering high growth prospects is online fashion retailer ASOS (LSE: ASC). The company experienced a challenging period between 2013 and 2015, when its strategy of investing in new international markets was called into question after disappointing financial performance. However, under its current management team it seems to have developed a successful strategy which has seen it generate growth in earnings of 43% and 25% in the last two years.
Looking ahead, ASOS is forecast to post a rise in its bottom line of 26% in each of the next two financial years. Beyond that, more growth could be ahead as it seems to have a successful strategy as well as improving levels of customer loyalty.
As such, while a price-to-earnings growth (PEG) ratio of around 2 suggests that its shares are expensive at the present time, there could be further upside ahead. That’s especially the case if the current bull run continues and investors become increasingly optimistic about the valuations placed on stocks that are able to offer above-average earnings growth.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. 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.