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2 boring but booming growth stocks I think will soar in 2020

Investors seeking real growth in 2020 should look closely at the following stocks, I think.

There’s a lot of names I wouldn’t go near in the UK AIM market, but if you focus on shares with low debt, rocketing margins and profits, you could make a great start to growing real wealth.

The businesses I’ll consider today operate in entirely unsexy industries. They’re not flashy. They underpromise and overdeliver, which I like immensely.

Begbies Traynor

Insolvency specialist Begbies Traynor (LSE:BEG) makes a great investment case. It has little debt despite the fact that bosses have been on a carefully-considered shopping spree in recent months, hoovering up smaller firms to boost growth at the £111m market cap firm.

A July 2019 placing raised £7.8m to fund its strategy of buying out profitable smaller insolvency specialists and three acquisitions (Alexander Lawson Jacobs, Ernest Wilson and Regeneratus) produced revenue of £5.9m and pre-tax profits of £1.8m in their last financial years.

Founder and executive chairman Ric Traynor is still the majority shareholder and December’s half-year results gave us a glowing report of a business in rude health, especially across its property advisory and insolvency arms.

Traynor revealed that his firm had “strong half-year financial performance“, decreased net debt from £6.3m to £2.3m over the period, with revenue up 21% and improved operating profit margins of 13.2%.

Brexit uncertainty and a weak economic outlook has claimed the lives of tens of thousands of businesses this year alone.

In fact, UK government figures for Q3 show insolvencies at a record high, with 30,879 going through the process. This is 22.7% up on the year and numbers are at their highest quarterly levels since 2010. Put another way, while more companies than ever are failing, business is booming for Begbies Traynor.

With earnings per share growing 24% over the last half, the price tag on the shares is falling: a forward P/E ratio of 14.5 makes BEG very attractive in my opinion.

The market has slept on the Begbies share price thus far, but with results like these and ever improving profit margins, investors are going to start catching on to the trend.

Porvair

Businesses that can carve out market-leading positions will attract slightly higher valuations but are still worth investing in.

CEO Ben Stocks has described how his air filtration group Porvair (LSE:PRV) has grown despite global trade issues weighing down less nimble firms, with pre-tax profits shooting up 41% to £7.4m year-on-year in the six months to the end of 31 May.

The board has increased dividends with earnings per share up 36% over the same period.

I like positive language in company reports and Porvair has this in abundance.

Order books are “robust” for the second half of the year, with prospects “encouraging”, say management. Full-year earnings will be ahead of expectations, with revenue 30% higher thanks to “strong growth” fuelled by demand for its aerospace and industrial products.

The business also has net cash of £3.9m, which is around half the level it was at in 2018, but this is due to £14m of spending on acquisitions and new growth prospects.

The Porvair share price won’t hang around at these levels for long: it has already jumped 131% in the last five years but I think there’s further it will go.

A Growth Gem

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Tom Rodgers has no position in the shares mentioned. The Motley Fool UK owns shares of Porvair. 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.