With concerns over inflation, supply chain issues and the perpetual elephant in the room that is Covid-19, I think it’s wise to keep a wishlist of stocks I’d be ready to buy if the recent sag in momentum turns into a correction. Having already looked at the FTSE 100 and FTSE 250, today it’s the turn of AIM stocks.

On song

The progress of audio equipment and software supplier Focusrite (LSE: TUNE) has been a thing to behold. In five years, the share price is up almost 900%! So much for the general belief among investors that risky AIM stocks never deliver.

A beneficiary of multiple UK lockdowns, the High Wycombe-based business now expects to report roughly £173m in revenue for the year to the end of August. That’s 33% up on the previous year. It’s also ahead of what the market was expecting. 

This is not to say the £1bn cap is risk-free. In addition to being susceptible to the global shortage of semiconductors, Focusrite recently warned on “significantly higher than normal” freight and shipping costs. This makes the current P/E of 44 look very rich, in my opinion.

Yes, it may boast eight brands and a net cash position, but I feel no stock is worth buying at any price. If a market correction comes, however, I’ll be first in the queue. 

Growth potential

Global identity specialist GB Group (LSE: GBG) is another AIM stock that has rewarded long-term holders. While unable to compete with Focusrite’s gains, the shares are still up over 175% since 2016. Again, this demonstrates how I might be able to generate above-average returns by looking for quality businesses on the junior, rather than the main, market.

I wouldn’t bet against GBG continuing to deliver. As the AIM stock highlighted in July, the huge growth in online activity should mean trading remains buoyant at each of its divisions: Identity, Location and Fraud. Indeed, the near £2bn-cap company said that it had already made a “good start” to its new financial year following record business in FY21. 

Defensive AIM stock

A final AIM stock on my buy list in the event of a significant market wobble is CVS Group (LSE: CVSG). Having doubled in value over the last 12 months, I remain convinced the veterinary services provider is a great play on the UK’s enduring love for pets. There certainly won’t be a lack of demand considering the huge number of households that have bought a puppy, kitten or (insert animal of choice) over the last 18 months or so. 

Once again, however, the valuation looks unattractive. CVSG shares trade on a forward P/E of 32. That’s still high, especially as margins in this line of work aren’t particularly large. Another potential risk here is that it may struggle to recruit the best talent to meet growth targets. I still regret not snapping up the stock back in 2019 when concerns over the shortage of suitably qualified vets following Brexit sent the share price down to just above the 400p mark. 

For now, CVSG stays on my watchlist.

The post 3 AIM stocks to buy when stock markets next tumble appeared first on The Motley Fool UK.

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

Royal Mail share price: finally delivering

There are a few reasons why investors appear to be taking a fresh look at Royal Mail. First, you have the recent half-year results.

As a result of shoppers moving online during lockdown (and thus needing their purchases delivered), a 10% rise in revenue was recorded in the six months to 27 September. The company also raised its forecasts on revenue for the full financial year. The fact that profits tumbled by 90% didn’t seem to bother the market all that much. 

Indeed, another contributing factor to the rise in the Royal Mail share price has been the change in analyst sentiment towards the stock. Back in November, JP Morgan upped its target price by 48%!

On top of this, you have the general tilt towards so-called ‘value stocks’ over the last few weeks. News of promising coronavirus vaccines has seen traders adopt a risk-on mentality. Accordingly, they’ve thrown money at companies they’d previously steered clear of. Royal Mail is one such business.

Not for me

Despite the change in general market sentiment, I can’t get excited. The parcels division may be doing well but there’s no shortage of competitors striving to take business from the FTSE 250 constituent.

Moreover, the full impact of a recession on the company remains to be seen. With levels of unemployment likely to continue rising as firms of all sizes adapt to the ‘new normal’, there’s no guarantee that people will go on a spending spree when the pandemic has passed. Even if they do, I suspect it’s more likely to be on outside activities and experiences rather than on things that need posting. 

Given this environment, wafer-thin margins and a not-insignificant amount of debt, I doubt that the Royal Mail share price will turbocharge peoples’ wealth anytime soon.

Here’s one that might. 

A better growth play

Self-proclaimed ‘global identity data intelligence specialist’ GB Group (LSE: GBG) is one of those companies I’ve been following for years and yet never bought. More fool me. In the last three years, its shares have more than doubled in value. By contrast, the Royal Mail share price is below where it was back in November 2017.

Today’s interim results from the business suggest there could be even more gains ahead. Thanks to additional demand from existing customers and contract renewal rates being maintained, revenue rose 9.8% to £103.5m over the six months to the end of September. Post-tax profit more than doubled to £11.8m, while net debt fell from £53.8m to just £2.7m over the period.  

Understandably, GB remains cautious about the impact of Covid-19 on business going forward. Notwithstanding, it feels it’s “well-positioned” given the need for all companies to embrace “digital acceleration.” The announcement of a 3p per share interim dividend would seem to back this confidence.

The Royal Mail share price may be showing great positive momentum right now. However, I think it’s likely GB Group will post better gains for holders over the medium-to-long term.

The post The Royal Mail share price is flying. I’d rather buy this top UK growth stock appeared first on The Motley Fool UK.

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

Today, I’m looking at two such examples, one of which has just released its latest set of results to the market.

Overseas growth

I last looked at global identity data intelligence business GB Group (LSE: GBG) in July. Since then, investors have continued to bid the share price up another 12%, demonstrating why buying pricey stocks with great momentum can still be a winning strategy.

This gain is nothing, however, compared to what some long-term investors will have achieved. Had you purchased the stock five years ago and done nothing, you’d be sitting on a gain of around 350%. Based on today’s numbers for the six months to the end of September, I wouldn’t be surprised if those invested for years rather than months continued to benefit. 

Thanks to “strong organic performance” in all of its solutions (Location, Identity and Fraud) and a boost from recent acquisitions, revenue increased 62% to £94.3m over the period. Interestingly, overseas sales represented a larger proportion of total business (57%) compared to revenues from the UK for the first time. That’s encouraging, especially for those who have concerns about the state of the UK economy in the aftermath of Brexit (assuming it happens). Post-tax profit doubled to £5.7m. 

Importantly, this kind of performance looks set to continue. According to CEO Chris Clark, GB has performed in line with expectations so far in the second half of the year and management suspects the company will hit analyst expectations.   

Once again, however, I would caution anyone interested in only holding the shares temporarily to consider the valuation first. A great company isn’t necessarily a great investment if the price tag is too high. At almost 39 times earnings before markets opened this morning, a lot of positive news looks priced in. Upward momentum is all very well but it can quickly reverse if there’s a lack of buyers. 

Fantasy stock

Another stock whose share price has grown considerably over the last few years is fantasy figure maker Games Workshop (LSE: GAW). Actually, that’s something of an understatement. Go back five years, and the stock was trading around 500p. Today, the very same shares are priced at a staggering 5,800p!

Can this kind of growth be sustained? Quite possibly. The company still has a lot of what it labels “green field territory” to infiltrate around the world (particularly in Asia) and ways of exploiting its brand and intellectual property. And, as my Foolish colleague Roland Head reported earlier this month, recent trading has been nothing short of superb. 

Valuation-wise, Games Workshop now trades on 25 times earnings. That’s clearly not cheap, but I do think it’s justified based on the aforementioned growth potential and the fact the £1.9bn-cap makes the sort of operating margins and returns on invested capital that most businesses would kill for, including GB Group. It also has zero debt.

There’ll be some inevitable volatility on the way but, for me, Games Workshop continues to be a high-quality stock that deserves to be owned for the long term. 

The post I think these multi-bagging growth stocks show the power of buying small appeared first on The Motley Fool UK.

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Paul Summers owns shares of Games Workshop. The Motley Fool UK has no position in any of the shares mentioned. 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.

Those buying a slice of the pie back then would have been sitting on a near-100% gain at yesterday’s closing price. Considering the abject failure of some recent IPOs — luxury car maker Aston Martin springs to mind — that’s a superb result over such a short time.

Today’s trading update for the three months to the end of June will likely generate even more interest in the stock.

Total assets under administration rose 6% to £50.7bn over the period and 13% in the last 12 months, easily outperforming the FTSE All-Share index. The total number of customers served by AJ Bell also increased 5% in the quarter to 224,644, with 94% using the company’s platform. 

For the long term

Given the tone of today’s statement, it’s not surprising that the shares have responded positively — climbing almost 5% in value as I type. Unfortunately, this makes the company’s valuation even less palatable than it was before. 

Before markets opened this morning, AJ Bell’s stock was trading at an eye-watering 58 times forecast earnings. Considering the recent volatility in popular stocks previously trading on similar valuations (ASOS, Fevertree), it’s understandable if many are put off building a position at the current time.

Pricey as the shares undoubtedly are, it’s hard to disagree with CEO Andy Bell’s belief that “people will need to save more via their pensions and ISA for the long term” when it’s considered that life expectancy is likely to continue rising and retirees are becoming increasingly active in their golden years. This is why I’d be far more willing to pay up for a company operating in this area over, say, an online retailer whose customers will switch to a rival in the blink of an eye.

With peer Hargreaves Lansdown boasting a market-cap of £10bn, there’s arguably plenty of room left for AJ Bell (£1.8bn) to grow. 

“A good start”

Another company I think has great long-term prospects is identity data specialist GB Group (LSE: GBG).

Like AJ Bell, shares have been in great form recently, rising by a third since the beginning of 2019 on account of the company trading above market expectations. Like AJ Bell, GB also provided an update on trading this morning. 

The £1.1bn-cap reflected that it had made “a good start” to its new financial year with revenue and profit in keeping with management predictions. In addition to securing a number of new clients over the period (including struggling bookie William Hill) GB also announced it had managed to pay down £10m of debt and make “good progress” with integrating its recent acquisitions (IDology and VIX Vertify).

GB’s shares traded at 34 times earnings before markets opened. While not as highly-valued as AJ Bell, that’s still very expensive. As you might expect from such a stock, there’s very little in the way of dividends (0.6% yield).

However, considering the huge opportunity available to GB as more organisations require support to help tackle fraud and comply with regulations, I’m not surprised by the recent interest from investors.

Those with many years in the stock market ahead of them will surely do well if management is able to continue successfully executing its growth strategy. 

The post I still think this FTSE 250 growth stock could be a great long-term buy appeared first on The Motley Fool UK.

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Paul Summers owns shares in AJ Bell. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

The performance in the stock was driven by the underlying growth and operational progress in the business. The firm is an identity data intelligence specialist with global operations, and revenue, earnings and cash flow have been notching up double-digit annualised percentage increases for years.

Good figures

Today’s full-year results report contains more good news. Revenue increased by almost 20% compared to the previous year and adjusted earnings per share moved 19% higher. The directors expressed their ongoing confidence in the outlook by pushing up the final dividend for the year by just over 16%.

Chief executive Chris Clark explained in the report that GB’s success boils down to its ongoing investment in “three core solutions,” which led to “exciting product innovation and deeper geographical reach.” The firm targets both organic and acquisitive growth and the outlook is positive for both.

Operationally and strategically, GB looks attractive to me and I can’t argue with the reassuring growth numbers the company pumps out. The firm is operating in a new and growing sector and seems well placed to grow much more in the years to come. But the stock presents me with a dilemma. The success story here is well known in the investing community and part of the rise in the share price over the years has occurred because of a valuation up-rating.

Highly rated

Today’s share price close to 620p puts the forward-looking price-to-earnings rating for the trading year to March 2020 at just under 37. Perhaps the company is worth its rating if you view it as a mark of quality, but buying shares on a valuation like that does introduce risk into the investing process, in my view. If the growth projections equalled or exceeded the rating, I’d feel more confident about buying, but City analysts following the firm expect earnings to grow less than 20% that year.

One way of handling the situation would be to take a long-term view and buy the shares anyway, but you’d need to be very confident about the firm’s potential for future growth to do that. Another method would involve waiting for a short-term operational set-back to knock the price, or a general market downturn before buying, which is the kind of approach to the dilemma I favour.

In the meantime, this is one of those occasions where I’d rather invest in the wider market than in this individual share by putting money into an index tracker fund such as one that follows the fortunes of a basket of small-cap firms.

The post What I’d buy instead of this 2,880% outperforming growth share appeared first on The Motley Fool UK.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Since the beginning of 2019, however, confidence has returned in spades. Just look at the FTSE 100 — up 10%.   

That said, this performance pales in comparison to the gains achieved by some individual stocks over the last few months.

In fine form

Down 28% between last September to the end of January, it’s fair to say that shares in online financial services provider Hargreaves Lansdown (LSE: HL) were firmly out of favour with investors a while back.

Since then, the very same stock has climbed 39% in value — a seriously big bounce for such a large company and no doubt helped by the aforementioned resumption of bullishness in the market. 

Such falls and subsequent recoveries are perhaps to be expected. Meanwhile, the company keeps adding to customer numbers, rapidly raising its dividends and generating consistently high returns on capital employed. The latter, in particular, is something that at least one of the very best fund managers in the UK looks for when searching for quality businesses. 

Another company whose shares have rocketed back to form has been mid-cap identity data intelligence specialist GB Group (LSE: GBG). 

Between mid-February and the end of last week, the stock has gained a massive 42% in value.

This month’s trading statement will have only served to further raise the profile of the company among retail investors.

Total revenue for the full year (which ended on 31 March) has been calculated at £143.3m — up almost 20% on the previous year and ahead of what the market was expecting.

At £31.7m, adjusted operating profit is up by a similar percentage and, again, ahead of what analysts had predicted. Numbers will be confirmed in early June. 

GBG is now valued at almost £1.2bn, making it one of the larger stocks in the junior Alternative Investment Market (AIM). 

It might not grow at the same rate going forward but the future certainly looks positive for existing holders. 

At a time when most retailers are struggling, sports and outdoor brands purveyor JD Sports Fashion (LSE: JD) has bucked the trend.

Superb full-year numbers earlier this month — including a 15.4% rise in pre-tax profit to just under £340m — show just how far ahead of its high street peers JD is performing.

At the beginning of the year, the shares were trading at 355p. They were at 612p before markets opened this morning — a fantastic gain of 72%.  Another classic example of when searching for gold in hated sectors can really pay off. 

With the acquisition of US firm Finish Line off to a great start and the purchase of battered footwear seller Footasylum seemingly welcomed by investors, JD can do little wrong right now.

The only drawback

So, three solid businesses whose share prices are all enjoying a purple patch. What’s not to like?

Not much in my opinion, apart from the valuations.

Unfortunately, their recent run of good form means that Hargreaves, GB Group and JD all now trade on high earnings multiples relative to industry peers and the market as a whole (forecast P/Es of 44, 40 and 19 respectively).

Buying now arguably carries more risk. Can we rewind a few months, please?

The post Forget the FTSE 100. If only I’d bought these 3 growth stocks a few months ago appeared first on The Motley Fool UK.

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

Since the beginning of the year, shares in the company have fallen by around 40%, excluding dividends.

After these declines, value hunters might be tempted to buy into Micro Focus. But is the stock really a bargain?

Worth buying?

After recent declines, shares in Micro Focus do look cheap. They’re trading at a forward earnings multiple of just 10.5, at the time of writing. Usually, this discount valuation would attract me to any business, especially because shares in this FTSE 100 tech darling are trading at a significant discount to the rest of the UK Software and IT Services Industry (trading at a P/E of 17.7).

However, I’m worried about what the future holds for the business. Management has struggled to integrate the company’s largest acquisition ever over the past year, which is concerning because Micro Focus’ primary line of business is combining and bringing old software systems up to date. The profit warning doesn’t, in my view, bode well for future growth. 

The deal also lumped the enlarged company with a mountain of debt ($4.5bn), which will take some time to pay down. Even though City analysts are expecting the group to report earnings growth of 56% for 2018 and a net profit of $857m, I want to see some concrete evidence that growth has returned before supporting this struggling enterprise.

In the meantime, I think small-cap GB (LSE: GBG) deserves a place in your portfolio.

Specialist business 

At first glance, compared to Micro Focus, shares in this company don’t seem particularly attractive because they’re changing hands for around 30 times fiscal 2019 earnings. However, unlike Mirco Focus, GB is growing rapidly and has a large, growing mountain of cash on its balance sheet.

The company’s half-year report, which was published this morning, revealed revenue growth of 9% year-on-year and the firm expects to hit City forecasts for the full-year, based on current trading. Analysts are currently projecting a net profit of £22.4m for fiscal 2019, more than double last year’s figure.

As I noted last time I covered the stock, one of the reasons why I think GB could be a fantastic growth investment is because the company is carving out a niche for itself in the data security business, an industry that’s only going to grow in size as the world becomes ever-more connected. What’s more, GB has high levels of recurring revenue and steadily improving margins, which I think are highly desirable qualities in any business. 

With this being the case, even though the stock might look a little pricey, I think it’s worth buying today.

The post After falling 40%, is this FTSE 100 stock a bargain? appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Micro Focus. 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.

Experian uses this data to build products to help other companies make decisions about their customers, for example, whether or not to offer them a credit card or loan. And the fact that it has so much data is its most significant advantage. Indeed, data has become the most sought-after commodity in the world in the 21st century, and it doesn’t look as if this is going to change anytime soon. 

The market leader 

Experian is a leader in the field because it has such a rich data trove. It has been gathering data on consumers for decades and is one of the most trusted data sources around, which I believe will guarantee its position in the market for decades to come. 

Its market-leading position allows Experian to generate fat profit margins (24% average for the past five years) and return on invested capital — a measure of profit for every £1 invested in the business — is just under 20%. That puts it in the top 10% of the market’s most profitable companies. 

While the firm’s valuation of 22.9 times forward earnings might look pricey, I believe it’s a price worth paying for a world-leading company throwing off cash for investors. There’s also a dividend yield of 2% on offer. 

Data security 

As well as Experian, I’m also positive on the outlook for the company’s smaller peer, GB Group (LSE: GBG). These two businesses have plenty in common, as GB is a specialist in identity data intelligence, focused on keeping data secure for its customers. 

As the world has become more data dependent, demand for GB’s services has exploded, with sales tripling in just five years. Acquisitions have helped along the way, the latest of which is Vix Verify Global, which GB announced it had acquired today for £21.2m in cash. The deal is part of GB’s ambitions to expand overseas and will give it a foothold in the Australia and New Zealand markets. 

Sit on the sidelines? 

Data security is a hot topic at the moment, and I reckon GB is one of the best investments around to profit from this theme. However, what I’m concerned about is the stock’s valuation. 

Right now, shares in the data security business are trading at a forward P/E of 37 — that’s right at the top end of what I would consider acceptable for any investment. Still, as my colleague Ian Pierce recently noted, GB has high levels of recurring revenue and steadily improving margins, which go some way to justifying the premium price. 

Personally, on valuation alone, I would pick Experian over GB right now, although I’ll be keeping a close eye on the latter with a view to buying if its valuation moderates. 

The post Down but not out: Why I believe this hidden FTSE 100 growth champion could help you retire rich appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Experian. 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.

JD Sports Fashion

JD Sports Fashion (LSE: JDS) is a company that I have long been bullish on. I like the company’s exposure to brands such as Nike and Adidas and I also like the international expansion story. So I’m pretty pleased with the stock’s recent performance as it is up 50% this year and it has jumped 17% since I tipped it as my top stock for July less than two months ago. These are impressive returns when you consider that a number of businesses across the UK high street are pretty much on life support right now. The fact that the stock has recently broken out to new highs suggests that investors are bullish here. Is it too late to buy now?

When I covered JDS back in late March, the shares were trading at around 350p and with analysts forecasting earnings per share of 23.5p for the year ending 28 January 2019, the forward P/E was 13.7. I saw considerable appeal at that valuation. However, fast forward to today, and the stock now trades on a forward P/E of 19, despite the fact that the consensus earnings forecast has risen to only 27.1p per share. On that P/E, there’s less value on offer, so I’m inclined to rate JD as a ‘hold’ for now. I still like the growth story here but the shares don’t offer as much value as they have in recent months.

GB Group

Another growth stock that I have historically been bullish on is identity specialist GB Group (LSE: GBG). I named it as a ‘blockbuster growth stock for 2018’ back in late December when it was trading at around 430p and since then the shares have risen to around 625p, for a year-to-date gain of approximately 45%. Like JD Sports, the stock has recently broken out to new all-time highs. Should investors jump on the growth story now?

GB released a positive AGM statement in late July that showed that the company continues to advance. The group advised that during the first quarter of the year it secured a number of contracts and that it was now working with the likes of Aldi and Hugo Boss in Germany, Indonesia’s fourth-largest bank BNI, and money transfer company MoneyGram. It also advised that it had made a “good start to the year” and that it was on track to deliver results that are “in line with market expectations.”

I continue to see a lot of potential in the growth story here as identity theft is such a big problem. However, the shares are certainly not cheap at present as they are now trading on a forward P/E of 43. With that in mind, I see GBG as a ‘hold’ too right now. This is a stock to buy on the dips, in my view. 

The post Two super growth stocks you should have bought a year ago appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in JD Sports Fashion and GB Group. The Motley Fool UK has no position in any of the shares mentioned. 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.

With that in mind, here’s a look at two top growth stocks outside the FTSE 100 that I rate highly.

GB Group

Identity theft is a massive problem for society in today’s digital world. According to fraud prevention group Cifas, last year there were 175,000 cases of identity fraud recorded in the UK, up 125% on a decade ago. That means that nearly 500 Brits had their identities stolen every single day.

One company that is benefitting from this worrying trend is identity data intelligence expert GB Group (LSE: GBG). The £800m market cap group has grown significantly in recent years and now serves over 17,000 businesses and organisations across 79 countries, helping its clients make the right decisions about their customers and employees.

GB’s FY2018 full-year results, released this morning, show that the group has significant momentum at present. For the year ended 31 March, revenue increased 37% to £119.7m including adjusted organic revenue growth of 15%, and adjusted operating profit surged 55% to £26.3m. Adjusted earnings per share climbed 17% to 15.3p, beating the consensus estimate figure of 13.2p. CEO Chris Clark was bullish in his assessment of the company’s outlook, commenting: “We believe there are exciting opportunities across all our sectors, in all our markets and that gives us great confidence for the future.”

Do these results make GB Group a ‘buy’? Looking at the valuation, today’s earnings figure places the stock on a trailing P/E ratio of 34. While that valuation isn’t outrageous for a company with strong growth prospects, it’s not overly cheap either. With that in mind, investors might be better off waiting for a slightly more attractive entry point before investing, in my opinion.

JD Sports Fashion

One growth stock outside the FTSE 100 that does trade at an attractive valuation right now is JD Sports Fashion (LSE: JD). The stock currently trades on a trailing P/E ratio of 15.3, which I think offers excellent value. Here’s why.

For starters, JD is a play on two of the most powerful sporting brands in the world — Nike and Adidas. Demand for these premium brands is likely to remain strong, in my view, especially with the World Cup on the horizon where the brands will be getting plenty of exposure.

JD is also a play on millennial consumers, who love their trainers and athleisure. These consumers are happy to spend a large proportion of their disposable income on such products, irrespective of economic conditions.

Furthermore, JD’s international expansion plans should drive growth going forward. Last year the group opened 56 stores across Europe, as well as a number of stores across Asia Pacific. And earlier this year, it agreed to buy The Finish Line, which has over 900 branded stores in the US. The growth potential here is significant.

JD Sports Fashion may not be as innovative a company as GB Group, but sometimes simple business models can be very effective. I rate the shares as a ‘buy.’

The post Two top growth stocks outside the FTSE 100 appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in GB Group and JD Sports Fashion. The Motley Fool UK has no position in any of the shares mentioned. 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.