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Two high-growth stocks to consider for your ISA

Many investors prefer to stick with blue-chip FTSE 100 stocks when investing within an ISA. For example, a recent look at the top stocks held by ISA millionaires revealed a strong focus on large-cap, dividend-paying companies. While that’s a sensible strategy, a small allocation to the small-cap area of the market could also be a good idea. This is because smaller companies can generate prolific returns over time and boost your wealth at a fantastic rate. With that in mind, here’s a look at two exciting small-caps to consider for your ISA this year.

Quixant

£250m market cap Quixant (LSE: QXT) has been a wealth generating machine for investors since it floated back in 2013, with the stock rising from its IPO price of 46p to 380p today. In other words, if you had invested just £1,000 in the IPO less than five years ago, your stake would be worth over £8,000 now. That’s the kind of prolific return I was talking about.

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Quixant designs and manufactures advanced hardware and software solutions for the global gaming industry. Both revenues and profits have exploded higher in recent years, and this morning’s full-year FY2017 results revealed that the company has strong momentum at present.

Indeed, for the year ended 31 December, revenue climbed 21% to $109.2m, with pre-tax profit rising 29% to $15m. Adjusted fully diluted earnings per share surged 38% to 22.9 cents. CEO Jon Jayal commented: “We have started 2018 with robust trading performance and are well positioned to deliver full-year growth ahead of our previous expectations. The new prospects we are working on give us confidence in our longer-term growth prospects.”

After trading above 450p in January, the shares have pulled back a tad recently, although they are up strongly today. At the current price of 405p, the forward-looking P/E ratio is a reasonable 22.8. As such, I believe now could be a good time to consider the stock for your ISA.

Restore

Another small-cap stock that has delivered stunning shareholder returns is Restore (LSE: RST). Over the last five years, the shares have flown from 120p to 500p, turning £1,000 into £4,200.

Restore specialises in document storage, document shredding and workplace relocation. This is obviously not the most exciting business model in the world, yet it appears to be a profitable one for the £570m market cap company.

Like Quixant, revenue and profits have trended upwards over the last few years, and full-year results released last week showed further progress with revenue and earnings per share climbing 36% (7% organic) and 25% respectively. The group hiked its dividend by an impressive 25%.

I’ve had my eye on this company for a while as it’s a favourite of fund manager Mark Slater – one of the top small-cap stock pickers in the UK. The shares have pulled back in recent months, and as a result, with the forward P/E at just 18.4, I think now could be a good time to get involved.

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Edward Sheldon 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.