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Have £1,000 to invest in September? Here are two stunning growth stocks to consider

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Today, I’m looking at two highly successful growth stocks listed on London’s AIM market. Both companies have delivered share price gains of more than 80% since June 2014, massively outperforming the FTSE 100’s 8% gain over the same period. Can this market-beating performance be maintained as we head into 2019?

Ahead of expectations

Internet marketing group Taptica International (LSE: TAP) counts big-cap names such as GlaxoSmithKline and Starbucks among its clients. The group’s focus is on delivering data-driven advertising through mobile, video, and social media channels.

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Taptica shares have fallen by about 25% so far this year, due to concerns that growth could slow. Today’s half-year results suggest to me that this price drop may have created a buying opportunity.

Revenue rose by 119% to $144m during the six months to 30 June, while operating profit climbed 34% to $13.9m. Profits for the full year are now expected to be ahead of previous expectations, according to management.

Based on analysts’ consensus forecasts, I now expect adjusted earnings per share to rise by more than 10% this year. Forecast for 2019 suggest a similar increase.

Too cheap to ignore?

One risk is that Taptica might start paying too much for acquisitions in pursuit of growth. A good way to measure this is with return on capital employed (ROCE), which compares operating profit with capital invested in a business.

The group’s ROCE was a healthy 17.4% in 2017 and has fallen to 16.7% over the 12 months to 30 June. I’m comfortable with this, given that the group is continuing to invest in its fast-growing Asian operations.

At the last-seen share price of 375p, this growth stock trades on a forecast P/E of about 11, with a dividend yield of 1.6%. That looks good value to me.

AIM’s biggest and best?

The biggest company on AIM is online fashion retailer ASOS (LSE: ASC), with a market-cap of £5.1bn.

The ASOS share price has risen by a staggering 25,400% since the firm listed in October 2001. Over the same period, the AIM All-Share Index has risen by just 32%, while the FTSE 100 has gained 44%.

This success shows how picking winning stocks (and sticking with them) can deliver life-changing gains. A £1,000 investment in ASOS in 2001 would be worth about £250,000 today.

Can ASOS keep rising?

ASOS currently trades on a 2018 forecast price/earnings ratio of 64, falling to a P/E of 52 for 2019. That’s a demanding valuation, as my colleague Rupert Hargreaves recently noted.

Analysts’ profit forecasts indicate that earnings per share were expected to rise by about 25% during the year ending 31 August. Earnings growth for the current year is expected to be about 22%.

These are impressive figures, if they can be maintained. ASOS’s track record suggests that this may be possible. During the first half of last year, the number of active customers rose by 17%, while total orders climbed 28% to 29.9m.

Some of this growth is coming from the group’s international expansion. At the moment, sales to the US and EU countries are still both lower than UK sales. This suggests there’s still plenty of opportunity for growth, despite increasing levels of competition from rivals such as Boohoo.com.

However, a premium valuation and a competitive marketplace means there’s a significant risk of disappointment. Because of this, I believe it makes sense to wait for the next market dip before considering a new investment in ASOS.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS, GlaxoSmithKline, and Starbucks. 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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