2 ‘secret’ growth stocks to watch right now

It’s time the secret was out about these outperforming stocks.

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Branded spirits and liqueurs company Stock Spirits Group (LSE: STCK) proved to be a great investment for shareholders during 2017. The shares rose around 56% to trade at today’s level close to 279p, but the firm still displays attractive metrics for quality, value and momentum, and I believe the stock warrants close attention now.

Today’s full-year results are encouraging. Constant currency revenue rose 3% during 2017 compared to the year before and adjusted basic earnings per share shot up more than 14%. In a sign that cash inflow backs profits, net debt closed down 11% for the year at just over €53m. The directors displayed their confidence in the outlook by pushing up the total dividend by almost 5%.

It’s all about brands

The firm offers a portfolio of products in Central and Eastern Europe that “are rooted in local and regional heritage.” Core operations cover Poland, the Czech Republic, Slovakia, Italy, Croatia and Bosnia & Herzegovina, but exports also go to more than 50 other countries around the world. Something is going right because sales volumes increased by 6.5% in 2017 and global sales volumes total more than 100m litres per year. 

When I think of Stock Spirits, I dream of it growing to become the next Diageo, and chief executive Mirek Stachowicz said in today’s report that after a strategic review the directors aim to focus more on its brands “to keep pace with the changing needs and tastes of our end consumers.” The idea is to “premiumise” the brands so that they become “more relevant to millennials.”  Planned tactics to achieve that include investing in digital marketing and adding new brands via carefully selected acquisitions.

A focus on brands is certainly what made Diageo mighty, but Stock Spirits may have a fair distance to travel if it is to expand its trading footprint further with its brands such as Stock, Fernet, Limonce, Zoedkowa, Saska, Keglevich and Zoedkowa. For now, the firm’s stated goal is to “become Central and Eastern Europe’s leading spirits business.”  Much of 2017’s share-price progress seemed to be driven by a recovery that the company engineered in its operations in Poland. With that recovery in place, I agree with Mr Stachowicz’s comment that Stock Spirits is now well positioned to achieve sustainable long-term growth.”

Simplification of operations

Meanwhile, full-year results from bio-decontamination and containment equipment manufacturer Bioquell (LSE: BQE) confirmed that the growth story remains on track for the firm. Since January 2017, the stock is up around 130%, driven by an impressive recovery in earnings.

During the year, the firm sold its airflow service business to concentrate on its core bio-decontamination operations, which now provide the majority of revenues. There is a residual business in the area of defence, but the directors expect the full benefits of an increased focus on bio-decontamination to show up in the results for profit during 2018.

I think that concentrating on a narrow area of operations is almost always a good thing and expect Bioquell to deliver growing profits in the years ahead. Executive Chairman Ian Johnson told us in today’s report that the company has invested in sales and marketing to “maximise” its potential in the international Life Sciences and Pharmaceutical market.

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.

Kevin Godbold has no position in any of the 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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