2 under-the-radar growth stocks I’d consider buying before the ISA deadline

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Buying stock in companies that rarely make the headlines can often be a sound strategy, particularly if the shares are held in an ISA. Not only is there the possibility of the shares re-rating as the herd arrives, any resultant capital gains are automatically protected from the taxman.

With time running out to take advantage of your £20,000 allowance (the current tax year ends on 5 April), here are a couple of stocks that appear to still be flying under many investors’ radars.

Rising profits

Thanks to larger peers like easyJet and Ryanair, Leeds-based low-cost airline Jet2 receives relatively little attention from the media. Quite how long this remains the case is open to debate, particularly when the most recent trading update from its owner —  travel and logistics firm Dart Group (LSE: DTG) — is taken into account. 

Thanks to a “more normalised pricing environment” in its Leisure Travel arm, Dart’s management now expects full-year group underlying pre-tax profit to come in “materially ahead of current market expectations“. That’s not something you hear too often from a company involved in this industry.

As far as the next financial year is concerned, Dart has already stated that forward bookings for this summer are “satisfactory“. New operating bases at London Stansted and Birmingham airports appear to be performing well and while the company understandably remains “cautious” on pricing, it now expects trading to be “broadly in line” with the 2017/18 financial year. 

At 13 times expected earnings, shares in Dart are cheaper than the aforementioned easyJet (16) and Ryanair (14), despite having already increased 50% in price over the last year alone. What’s more, the company’s growing distribution and logistics division — Fowler Welch — arguably gives it a degree of earnings diversification missing from the other two.

Revenue growth

While the threat of increased regulation in the CFD/spread betting industry has certainly hit the headlines, it feels like £445m cap CMC Markets (LSE: CMCX) has been somewhat forgotten about, at least when compared to its larger peer Plus 500. Although the former’s stock has climbed 17% in value over the last year, that’s nothing compared to the latter’s 178%. Shares in market leader IG Group have also performed better, rising 52% over the same period. Nevertheless, I still think shares in CMC could be worth picking up.

While revealing in January that the number of active clients had fallen 4% over the year to date, the company highlighted that the proportion of high-value traders had actually grown, leading to a 26% increase in revenue per client over the same period. 

There’s also the fairly reasonable valuation to consider. Taking into account a predicted 19% drop in earnings per share in the 2018/19 financial year, CMC’s stock can be picked up for 12 times forecast earnings at the current time, with a PEG ratio of just 0.5. Although nothing can be guaranteed, the shares also look set to yield close to 5%. 

Whether the aforementioned threat of regulation is sufficient to unnerve prospective investors will naturally come down to financial goals, time horizons and risk appetites. That said, I’m inclined to agree with CMC that its focus on attracting experienced and wealthy clients to its services (rather than amateur traders) should mean that its long-term outlook remains positive. The fact that the company has 15 offices around the world and a growing stockbroking business in Australia shouldn’t be ignored either.

Go for growth!

If you're looking for top stocks to add to your ISA before the end of the current tax year, look no further than one identified by Mark Rogers, Head of UK Investing at the Motley Fool.

Marks thinks this top British brand is set for an exciting future, given its desire to expand rapidly over the next few years.

For more information, simply download your copy of his special report.  It's completely FREE to read and comes with no obligation whatsoever.

Click here and it's yours.

Paul Summers has no position in any of the companies 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.