The Motley Fool

Tempted by the IAG share price? I’d consider these top growth stocks instead

Image source: Getty Images.

The share price of British Airways owner and FTSE 100 constituent International Consolidated Airlines (LSE: IAG) has been well and truly walloped by the coronavirus pandemic. Today’s price of a 91p a pop is 65% below where the shares stood at the beginning of 2020. Prior to the Covid-19 outbreak, they haven’t flown this low since 2013. 

As investors, we learn that the greatest gains can often come where others fear to tread. So, could those buying now profit handsomely in time? It’s certainly possible. News of a vaccine or simply a drop in infection rates could see markets rally. In such a situation, it’s likely that the biggest victims of the pandemic will fly the highest

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...

Having said this, it’s vital to consider the risk/reward payoff. The reason the IAG share price is so low (not helped by the recent equity fundraising) is because the market is concerned that it will take air travel a long time to fully recover. We’re talking years, not months. On top of all this, the company is understandably no longer paying dividends. For me, this was the chief attraction to owning the shares in the past.

In light of this, I think investors should consider alternative, high-growth destinations for their cash. Here are just two suggestions.

Dotdigital

In July, software provider dotDigital (LSE:DOTD) said that the pandemic had a “minimal impact” on trading since most of its revenue (estimated at 85%) was recurring. Indeed, adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) was now expected to be “comfortably ahead of market expectations“.  In contrast to the IAG share price, dotDigital’s valuation understandably soared!

In addition to this momentum continuing into the new financial year, the firm announced yesterday that it would be included in the government’s G-Cloud initiative. A new market for dotDigital, G-Cloud is a platform allowing public sector organisations to buy services without running a full tender.

Any drawbacks? Well, the shares certainly aren’t cheap at 39 times forecast FY21 earnings. Then again, the company reeks of quality with consistently high margins and returns on capital employed. Importantly, it also has net cash on its balance sheet — handy given the outlook for the global economy. 

At this price, dotDigital isn’t a screaming buy, but it’s certainly one to consider scaling into and/or buying on any dips. 

Mortgage Advice Bureau

Another stock posting great growth recently has been Mortgage Advice Bureau (LSE: MAB1).

Despite “an exceptionally challenging market“, yesterday’s interim results for the first half of 2020 included a 4% rise in revenue (to £63.5m) and 6% increase in adjusted pre-tax profit (to £7.9m).

Since the housing market reopened, the company has seen “continued strong trading“. New applications have climbed to record levels and its share of the new mortgage lending market rose 17%. 

As a result, the firm’s management expects that adjusted profit before tax for the full year will come in “significantly ahead” of what the market was predicting. This is dependent, of course, on no further coronavirus-related restrictions being announced. 

The shares currently trade on a very high 41 times earnings. However, a PEG (price-to-earnings/growth) ratio of just 0.5 suggests investors will actually be getting quite a lot of bang for their buck.

Like dotDigital, I think this company warrants more attention, particularly from those tempted by the IAG share price.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended dotDigital 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.