2 mid-cap stocks generating unbelievable revenue growth

Revenue growth is one of the first things analysts often look at when assessing a company's growth prospects. Investors want to see that a business can perpetually generate more sales over time, as it's difficult to generate higher profits if revenue is not rising.

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While it's not easy to find strong revenue growth among the largest FTSE 100 companies at present, there are a selection of FTSE 250 companies that are increasing their revenues at an exceptional rate. Today I look at two such companies and examine whether they're priced to buy.

Playtech

£2.8bn market-cap Playtech(LSE: PTEC) designs software platforms for the online, mobile and land-based gaming industry. The gaming industry is a fast-growing area, and with the help of an aggressive acquisition strategy, the company has enjoyed incredible revenue rises in recent years.

Indeed, revenue has climbed from EUR142m in FY2010 to EUR630m in FY2015, a compound annual growth rate (CAGR) of an impressive 35%. The company reports its FY2016 final numbers on 23 February and analysts forecast revenue to come in at EUR725m, a 15% increase on last year.

However, despite the strong revenue hikes, shares in Playtech don't look overly expensive. Consensus earnings estimates are EUR0.67 for FY2016 and EUR0.84 for FY2017, meaning that Playtech trades on a P/E of 15.6, falling to a low 12.5 for FY2017.

Although the company has performed extremely well for shareholders in the last five years, returning around 30% per year, in my opinion the growth story still has plenty of legs. The company stated in January that the board remains "confident of further growth in 2017 and beyond" and as such I reckon Playtech has strong appeal at the current valuation.

GVC Holdings

Multinational sports betting and gaming group GVC Holdings(LSE: GVC) has also enjoyed strong revenue rises in recent years. The company's top line has climbed from EUR55m in FY2010 to EUR248m in FY2015, a CAGR of 35%, yet after the game-changing acquisition of bwin last year, analysts now anticipate FY2016 revenue of a lofty EUR865m.

GVC's share price has run hard in the last 15 months, rising from around 370p in late 2015, to now trade at 700p. Does that mean it's too late to buy? In my opinion, no.

While FY2016 earnings are forecast to come in at a low EUR0.33 per share, earnings are expected to rise 70% to EUR0.56 for FY2017. That places the company on an undemanding FY2017 P/E ratio of just under 15.

Management recently stated that "the positive trading momentum experienced in 2016 has continued with a particularly strong start in 2017" and that "we see a lot of organic growth opportunities for the group in 2017 and beyond."

With the company on target to achieve significant synergies from the bwin acquisition and analysts forecasting a considerable dividend hike in FY2017, I believe GVC has long-term appeal, especially now the shares have moved from AIM to the main market of the London Stock Exchange.

Looking for a top growth share?

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