The Motley Fool

I think these are the best growth stocks to buy now to build a £1m ISA

Image source: Getty Images.

I’m guessing you’d like to retire with a £1m stocks portfolio. Keeping your shares in an ISA to avoid tax should help your money to grow faster. But to make a million before you retire, you’ll also need to find the best growth stocks to buy today.

The stock market crash has slashed the valuations of many high-flying growth stocks. Many have bounced back strongly, but I think there are still some bargains to be found.

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...

Today I want to look at two of my favourite growth stocks and explain why I think they could help you hit a million.

A long-term winner

My first pick is price comparison firm (LSE: MONY). I’m sure this business needs no introduction, but you might be surprised at just how profitable it is.

Helping customers find cheaper credit cards, loans, insurance and energy suppliers generates big commission payments for Moneysupermarket. In 2019, the group generated an operating margin of 30% on revenue of £388m.

Although the coronavirus pandemic has hit demand for many popular financial products, I only see this as a temporary disruption. Moneysupermarket’s profits rose by 50% between 2015 and 2019, and the company is developing new services to support future growth.

City forecasts suggest profits will fall by around 10% in 2020, before rising by 15% in 2021. This puts MONY shares on a forecast P/E of about 17 for 2021, with a dividend yield of 4%. I rate the stock as a buy at this level. In my view, this is one of the best growth stocks you could buy today.

Under the radar: a top growth stock I’d buy now

IT specialist FDM Group (LSE: FDM) probably isn’t a company you’ve heard of. This FTSE 250 firm provides IT consulting services for clients. Areas where FDM works include software testing and development, project management and business analytics.

FDM directly employees all of its consultants (known as ‘Mounties’) so it can provide a consistent and reliable service to clients. The company is run by CEO Rod Flavell, who owns 7.5% of the stock, suggesting that his interests should be closely aligned with those of smaller shareholders.

Revenue topped £250m for the first time in 2019, generating an operating profit of £53m. Like Moneysupermarket, this business is highly profitable and generates a lot of surplus cash. This is used to fund continued growth and pay generous dividends.

FDM’s dividend is paused right now, but trading has remained stable so far this year. I expect dividend payments to restart fairly quickly.

The shares currently trade on 24 times 2021 forecast earnings. That may seem expensive, but I think FDM’s strong growth record and high profitability justify a high price. I’ve been buying more during the stock market crash.

Make a million quicker

The average long-term return from the FTSE 100 is 8% per year. My sums suggest that if you invest £250 per month in the FTSE within a tax-free ISA, you’d hit £1m after 41 years.

FDM and Moneysupermarket have generated average earnings growth of 15% per year since 2014. If you can build a portfolio of shares that generate this kind of growth, I estimate that you could build a £1m ISA in just 26 years.

That’s why I reckon these are two of the best growth stocks you can buy now.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Roland Head owns shares of FDM Group. The Motley Fool UK has recommended 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.