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2 shares that I think are poised for huge growth

Some investors are tempted to go searching for the cheapest AIM shares to find growth gems, but I think there’s plenty of companies in the FTSE 350 that have big growth opportunities. Some are very expensive – for example, technology company Sophos has a price-to-earnings ratio of over 50. Some other high-profile growth companies such as Boohoo also have very high P/E ratios because of high investor expectations.

A cheaper growth gem

UDG Healthcare (LSE: UDG) is a supplier to the healthcare industry. It offers services such as communications and packaging and more. The Dublin-based company makes 64% of its revenue in North America, 19% in the UK, and 17% in the rest of the world.

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UDG delivered a three-year average total shareholder return of 33.6% in 2019, which is very impressive. The group is also driving up its return on capital employed and margins which may explain why the share price is doing so well.

Recent results show the group is very much on track. Based on its performance in the first quarter of the year, it now expects constant currency adjusted diluted earnings per share for the year ending 30 September to be between 7% and 9% ahead of last year. Both parts of the group – its Ashfield division and Sharp – contributed to the improved performance, which bodes well for the future.

I think the improving performance of the business means there’s plenty of potential for the share price to keep on going up. The P/E of 20 means the shares aren’t cheap but given the scope for growth I don’t think it means the shares aren’t worth buying for their growth potential. 

A cheap consumer goods company

Britvic (LSE: BVIC) is the owner of brands such as Fruit Shoot and Robinson’s. As a consumer goods company, its share price is very favourable when compared to similar companies. For example, despite profit warnings, AG Barr, owner of Irn-Bru, has a P/E over 18. The much bigger Unilever and Reckitt Benckiser both have ratios near to 20.

Britvic is in the process of trying to sell assets in France, which should simplify the business and allow it to focus on building the branded business in the country. This could be one small catalyst for the share price.

One of its stand-out quality metrics is its five-year return on capital employed, which is a solid 16.8%. Good, double-digit ROCEs are a pointer to companies that can grow very profitably.

At the end of January this year, it revealed trading in the first quarter was “robust” and the company remains confident of achieving market expectations for the year ending 30 September.

I think a combination of strong brands, international reach, and strong margins combine to make Britivic a great business. The fact the shares are now so cheap is an added bonus and I think makes now an ideal time to snap up the shares.

Both UDG Healthcare and Britvic could experience significant growth and see share prices rise faster than most other companies in the coming years.

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Andy Ross owns shares in Reckitt Benckiser. The Motley Fool UK owns shares of and has recommended Britvic and Unilever. The Motley Fool UK has recommended boohoo group and UDG Healthcare. 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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