2 FTSE 250 growth stocks I would buy today

These two popular FTSE 250 (INDEXFTSE:MCX) stocks are on my investment wish list.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I’m looking at two stocks that seem to be on-trend at the moment and are proving to be popular with investors. However, that doesn’t always guarantee a stock’s long-term success. As always, the market could change in an instant.

Having said this, after watching these stocks for a while, I truly believe that they’re worth investing in. With strong track records and what look like bright futures ahead, I’m expecting some great returns from them in the future.

Getting technical

Softcat (LSE: SCT) is an IT infrastructure provider that has enjoyed significant growth this year with the stock climbing a huge 29% already. This is mainly due to increased demand for the hybrid cloud service that the company provides, which has resulted in higher sales and a positive outlook for the year ahead.

What impresses me about Softcat is the very high ROE of 77%. The industry average is just 16% which suggests that the company is of high quality. Are there any dark clouds on the horizon? Maybe Softcat’s debt might affect its prospects? I don’t think so as the company is completely free of net debt. The strong balance sheet and impressive sales certainly give me the confidence needed to invest.

Furthermore, Softcat is currently paying a dividend of 3%. This is a reasonably attractive yield from a growth stock and the company has been paying dividends for three years now. The dividend appears to be sustainable too, with the firm only paying 42% of its profit towards dividends last year, so the payout seems to be significantly covered.

The only real negative I can see is a large P/E of 34, which suggests I’d be paying top dollar for the stock right now. However, with such a positive outlook and reliable dividend, I think it’s worth the investment due to the potential for significant future growth.

Death of the traditional pub?

In the UK we have been seeing many of our favourite pubs closing due to the simple lack of customers. However, JD Wetherspoon (LSE: JDW) hasn’t been feeling the pinch. The company operates nearly 900 pubs around the UK and remains popular despite other traditional pubs suffering.

It has has seen total sales rising 7.4% this year so far, a figure that’s virtually unheard of in the pub industry. What’s even more impressive is that the share price has risen 99% in the past three years. Yes you read that right, 99%. The company has been enjoying significant growth, which is reflected in the high P/E ratio of 19 with a low dividend yield that’s just under 1%.

However, with the company seemingly shrugging off the weak spending environment, with the stock rising strongly this year and with earnings per share growing at an annual rate of 11.5% since 2013, I see a positive outlook ahead. I’m certainly willing to pay the premium for a stock that has consistently outperformed the FTSE 250 by 6% per annum.

I’d be confident to invest in the firm, especially with the founder Timothy Martin having such attention to detail and a rare hands-on approach that has contributed to the company’s success.

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.

fional has no position in any of the shares mentioned. The Motley Fool UK has recommended Softcat. 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.

More on Investing Articles

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »