Why I'd still buy "expensive" growth star stocks Just Eat plc and B&M European Value Retail SA

With markets looking frothy, it's more important than ever for growth-focused investors to separate those stocks being held up by blind hope from those with a decent chance of hitting (and perhaps exceeding) market expectations. Here, I believe, are two of the latter.

Just buy?

Climbing 67% over the last two years, it's no real surprise that £4.3bn cap takeaway marketplace operator Just Eat(LSE: JE) is trading on a forward earnings multiple of 38.

In July's interim results, the company declared a "strong start" to 2017 with a 44% rise in revenues (to slightly under £247m) and 46% increase in pre-tax profits to £49.5m.

With over 80m orders placed over the first six months of the year and the number of active users rising 19% to 19m, it's clear that hugely cash-generative Just Eat still has a commanding position in the many markets it operates in, despite fears that peers Deliveroo and UberEATS would steal its crown.

As a result of beating management expectations over the interim period, Just Eat raised its revenue guidance for the full year from £480m-£495m to between £500m-£515m, adding that it was "exceptionally well-placed" as it entered H2. Management also signalled its intention to continue reinvesting cash into the business to exploit additional growth opportunities.

Despite its steep valuation, earnings per share growth of 66% and 37% in 2017 and 2018 respectively leave the company on a price-to-earnings growth (PEG) ratio of just 1 for this year and next, suggesting that prospective investors would still be getting plenty of bang for their buck.

While big expectations frequently lead to huge disappointment, I think Just Eat might be an exception.

Inflation-proof

Those who bought shares in B&M European Value Retail SA(LSE: BME) at the beginning of November would have enjoyed a very respectable 53% rise in the share price over the last 10 months.

While not in the same valuation league as Just Eat, this kind of performance has left it trading on a price-to-earnings (P/E) ratio of 20 for the current year -- far higher than many struggling retailers. Based on recent results, however, I think this is still a price worth paying.

In its most recent update, the £3.6bn cap chalked up strong growth, despite "challenging trading conditions and economic uncertainty." Q1 group revenue increased 18% with "excellent" like-for-like growth of 7.3% being achieved in the UK thanks to strong grocery sales. This momentum appears to have continued into Q2, allowing the company to say it is on course to achieve profit expectations for the full year.

There are other attractions. Whereas most supermarkets offer a huge variety of brands, B&M's focus on selling a more focused range helps keep stock levels sensible and cash flow healthy - a similar strategy to that employed by Aldi and Lidl. The company's positive relationship with Chinese suppliers also means that it can import products very cheaply, allowing it to undercut rivals on price. And while UK consumers remain a fickle bunch, CEO Simon Arora's belief that more shoppers will seek out value in its stores as inflation continues to rise feels entirely logical.

These positives, when combined with the company's plans to almost double its number of UK stores and its recent acquisition of convenience retailer Heron Foods, lead me to suspect that B&M is another growth story that looks set to run.

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Paul Summers has no position in any shares mentioned. The Motley Fool UK has recommended Just Eat. 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

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