Why I'd buy these 2 rising growth stocks

Since the start of the year, a number of shares have risen sharply in value. For some of them, this could now mean they are relatively overvalued. However, in other cases there could be further upside potential. Here are two shares which appear to fall into the latter category, based on their growth potential and valuations at the present time.

Strong start

Reporting on Thursday was acquisition specialist Marlowe(LSE: MRL). In its first year trading as Marlowe plc it was able to deliver eight acquisitions, with one further acquisition after the year-end. During the period, it has established a platform for growth which is focused on the fragmented fire & security and water treatment markets. It was able to achieve run rate revenues of £65m, while adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) was £4m.

With net cash of £3m and debt headroom of £15.3m, there seems to be scope for further M&A activity over the medium term. In fact, the company has identified a well-developed pipeline of attractive opportunities which could add scale to the business. This could help it to achieve its goal of building a leading UK support services group in critical asset maintenance.

Looking ahead, Marlowe is forecast to record a rise in its bottom line of 24% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 1.4, which suggests it could offer capital growth potential. That's despite its shares having risen by 26% in the last three months. With investor sentiment on the up and its financial performance set to improve, now could prove to be the right time to buy a slice of the company.

Wide-ranging potential

Also making gains in recent months have been shares in Curtis Banks(LSE: CBP). The pension administration services provider has risen by 14% since the start of the year. However, it continues to trade on a relatively enticing valuation. For example, it has a price-to-earnings (P/E) ratio of 23 despite being forecast to post a rise in earnings of 33% in the current year, followed by further growth of 13% next year. This translates into a PEG ratio of 1, which indicates its share price could move considerably higher over the medium term.

As well as growth and value appeal, Curtis Banks also offers significant income potential. It may only yield 1.5% at the present time, but it is expected to record a rise in dividends of 25% this year, and 20% next year. This puts it on forward yields of 1.9% in the current year and 2.3% next year. Despite this, it is expected to cover shareholder payouts almost three times next year. This suggests dividend growth could easily beat earnings growth over the coming years. With inflation moving higher, this could increase the appeal of the stock and help to push its share price higher.

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Peter Stephens has no position in any 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.

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