The Motley Fool

ISA investors! Should you buy or avoid these growth stocks in February?

It’s not been a happy new year for Joules Group (LSE: JOUL) investors of late. Share price volatility has been very much in vogue for the lifestyle clothing retailer at the start of 2020. But the mood is generally dour as trading has very much disappointed more recently.

A whopping profit warning caused the share price to close at three-and-a-half-year lows last month. Sales were “significantly behind expectations” in the seven weeks to January 5, it said, falling 4.5% annually. This was a shocking result considering the 11.7% corresponding rise a year earlier. And it caused the AIM firm to advise that underlying profit for the fiscal year to May 2020 will be “significantly below market expectations.”

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Too risky right now?

The retailer has erased some of this share price weakness more recently, it has to be said. Stock availability issues affected online sales and prompted that profits downgrade of mid-January. But in a subsequent half-year release, Joules said that the cause of the problem had been identified, prompting investors to pile back into the stock.

Market-makers were assured by news that the retailer has “taken steps to rebalance the allocation of stocks between channels for spring/summer 2020.”  They liked news that it is “ strengthening… underlying processes” too. A glance at City forecasts would suggest that its recent problems are just a flash in the pan as well. Joules is predicted to recover from a rare profits drop of 17% in financial 2020 with a 10% rise the following year.

Broader retail conditions lead me to believe that such a bold estimate could fall flat, though. A recent survey from PwC suggested that fashion sales will remain in the doldrums in 2020. In it, 33% of respondents said they will buy less this year, 24% commenting that they will buy clothes less often.

The threat of persistent Brexit uncertainty and the rising awareness surrounding sustainability casts a pall over the whole retail sector. And Joules, which trades on a forward P/E ratio of 16.5 times, is just too expensive in light of this outlook. I’d avoid it like the plague right now.

Safe and sound

I’m confident that Safestore Holdings (LSE: SAFE) will impress the market with first-quarter financials on February 13. And this makes it a top buy today. Broader consumer confidence might still be in the doldrums, but this isn’t damaging trade at the self-storage operator.

It’s possible, in fact, that activity could have picked up in recent weeks. Demand for Safestore’s lock-ups from both private individuals and businesses may have jumped following December’s general election and the subsequent improvement in near-term Brexit clarity. Not that the company needs one-off events like this to record solid revenues growth (sales rose a healthy 5.5% in the fiscal year ending October 2019).

Through aggressive expansion, Safestore is exploiting the country’s shortage of self-storage facilities to its fullest. And it’s a programme that City analysts expect to accelerate earnings growth from the mid-single-digit percentage rises of recent years to a 14% increase in fiscal 2020.

A forward P/E ratio of 26.4 times is expensive on paper, sure. But I reckon the FTSE 250 firm’s exciting growth plans and immense structural opportunities merit a premium rating.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Joules Group. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.