Should you buy growth-focused Burford Capital plc and Gym Group plc following today's results?

Gym
Gym

With a market cap of £1.5bn, litigation finance specialist Burford Capital(LSE: BUR) is one of the larger companies listed on AIM. Over the last year, shares in the Guernsey-based business have put in a sublime performance, rising 234%. Using today's full year results as a guide, I think there could be more upside to come.

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Thanks to a huge 60% jump in income from litigation-related investments, overall income at Burford increased by 59% in 2016, rising to a record $163.4m. This allowed the company to achieve a 75% increase in net profit (up to $115.1m) and 61% increase in operating profit (up to $77.2m). Although these figures fall slightly when costs from the recent acquisition of Gerchen Keller Capital are taken into account, that's still a remarkable performance.

A lot of bang for your buck

Burford's niche area of expertise, and the consequent barriers to entry into the industry, should give investors a degree of protection, even if earnings visibility is rather limited. Its decision to begin offering legal insurance and loans to law firms should help with the latter.

Although forecast EPS growth of 24% for 2017 leaves the company on an expensive looking price-to-earnings (P/E) ratio of 20, a low price-to-earnings growth (PEG) ratio of just 0.8 suggests investors will still be getting a lot of bang for their buck.

Having now achieved its seventh consecutive year of double digit growth, I suspect Burford has shown itself to be an ideal medium-to-long term investment.

Pump or dump?

Like Burford, £230m cap Gym Group(LSE: GYM) also released final results this morning. Unlike Burford, the latter's share price has been on a downward trajectory since last April's high of 274p, falling to just 180p before markets opened this morning. Will today's numbers help to reverse this poor run of form? Quite possibly.

In 2016, the budget gym operator recorded revenues of £73.5m -- a 22.6% increase on 2016's figure. Positively, adjusted pre-tax profit also climbed to £8.7m, compared with a loss of £2m the year before.

Away from the financial stats, Gym Group opened 15 new gyms in 2016, bringing its total estate to 89. As a result of its "well developed site pipeline", it expects to open 15-20 more in 2017.

Membership numbers were also up by just over 19% (to 448,000) compared with last year. According to the company, this figure has since grown by a further 10.5% since the end of December -- to 495,000 -- allowing it to speculate that 2017 should be another good year for business.

Not convinced

Gym Group's shares rose 2.1% in early trading. Given the positive reception by the market, should private investors be snapping up the shares? I'm not totally convinced.

While its "low cost, 24/7, no contract model" may be stealing market share and should give the company a degree of protection from any Brexit-related reduction in consumer spending, the highly competitive industry in which Gym Group operates means that rivals will be hard on its heels. Speculating on future performance from figures generated over the first two months of the year is also problematic, since many people quickly renege on New Year resolutions to get fit, or prefer to exercise outdoors when (or, perhaps, if) the better weather arrives. Ironically, Gym Group's flexible approach to memberships could actually be its biggest weakness.

True, a price-to-earnings growth (PEG) ratio of just 1.04 for 2017 suggests that investors aren't paying very much to benefit from the company's rapid expansion plans. Nevertheless, I remain convinced that there are companies with better prospects elsewhere.

An alternative?

If you're on the lookout for high-growth companies, you'll definitely want to read a special report from the Head of UK Investing at the Motley Fool, Mark Rogers.

Mark thinks he's found another cracking opportunity in the form of a top British brand that has plans to expand overseas at a rapid pace over the next few years. If successful, the shares could even triple in value over the next decade.

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Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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