One 'hidden' growth stock I'm tempted to buy today

Shares in International Public Partnerships(LSE: INPP) fly under the radar of most investors because the company isn't a traditional business. Indeed, IPP is a closed-ended company that invests in financial instruments and other tangible assets such as schools, health facilities and rail infrastructure.

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The company is extremely good at what it does. Over the past four years, pre-tax profits have risen from £68.4m to £143.7m today. Over the previous five years, shares in it increased 31%.

Today the company reported its results for full-year 2016, which are rather upbeat. Net asset value for the group rose 24% from £1.3bn to £1.6bn at the end of 2016. Net asset value per share increased by 9.2 % from 130.2p to 142.2p. And pre-tax profit before finance costs increased from £84.5m in 2015 to £179.1m. During 2016, management invested £489m in 18 projects and it believes there are plenty of other opportunities for capital investment on the horizon. Specifically, in today's results release, management noted there is a "clear pipeline of new opportunities offering attractive returns for 2017 and beyond."

Slow and steady growth

IPP isn't the next Boohoo.Com or Fevertree, nonetheless, the company looks to be one of London's most attractive growth investments.

Although growth is relatively slow compared to the likes of Boohoo, it is based on steady balance sheet expansion, which is likely to be more sustainable in the long term. What's more, IPP's management is committed to steady dividend increases for the firm. At the time of writing the shares currently support a dividend yield of 4.2%, and management has announced its commitment to raise the payout to at least 6.82p per share for 2017, from 6.65p for 2016 before lifting it once again in 2018 to 7p.

And if IPP can continue to grow its net asset value per share at a similar rate to that seen over the past five years, the shares have the potential to produce a total return for investors of around 9.2% to 13.4% per annum. This is assuming per share net asset value growth of 5% to 9.2% per annum and a dividend yield of 4.2%. As the shares are currently trading at 156p, a slight premium to net asset value, further share price appreciation might be limited in the near term. But assuming net asset growth continues, it shouldn't be long before the premium is reduced.

The bottom line

So overall, IPP may not be the market's most attractive growth investment, but it is a growth stock you can depend on. Steady net asset growth, coupled with the firm's dividend policy should ensure high single-digit or double-digit total returns for investors. And as economic growth picks up around the world, management should be able to capitalise on more opportunities to invest and generate returns for shareholders. That's why I'm tempted to buy IPP today.

Looking for growth?

IPP is a great slow and steady growth stock but if you're looking for a company that packs a bit more of a growth punch, there's one stock our analysts here at the Motley Fool believe stands head and shoulders above the rest of the market.

This company is established and already has a record of impressive growth behind it.

In fact, we believe this hidden gem might just be the perfect small-cap growth stock.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended boohoo.com. 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.