Could these 2 hot growth stocks help you retire early?

Ricardo
Ricardo

You only have to look at Domino's Pizza, Accesso Technology and ASOS to appreciate that managing to bag a few top long-term growth stocks for your portfolio can seriously enhance your wealth. Indeed, mega-multibaggers such as these could help you retire early.

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With this in mind, I'm looking today at a recently-listed -- but already familiar -- high street name and another small-cap company few investors will have heard of. Let's begin with the latter.

Long-term growth drivers

Ricardo(LSE: RCDO) has grown its earnings by 84% over the last five years and its shares have risen by 145% over the same period. The company is a member of the FTSE SmallCap index and at a share price of 918p has a market value of close to £500m.

This is a global business that generates about 80% of its revenue from technical consulting and 20% from advanced engineering products. The company posted half-year results (for the six months ended 31 December) this morning. It reported a 6% increase in revenue to £167m and a 7% rise in underlying earnings per share. The first-half growth is not at the rate seen over the last few years but the order book stands at a record £244m, up 21%, which bodes well for the second half.

What I like about this business is the long-term growth drivers from which it benefits. These include international agreements to reduce carbon dioxide emissions, market and regulatory requirements for improved energy efficiency and the rise of global connectivity. Ricardo's expertise in helping clients meet these challenges should deliver good long-term organic growth, supplemented by strategic partnerships and acquisitions.

Trading on a reasonable 16 times forecast full-year earnings, and with a handy 2.1% dividend yield, I see Ricardo as well capable of outperforming the wider market, although it would perhaps take some major and highly successful M&A activity for it to deliver truly spectacular long-term returns.

Chocolat a little rich?

Little more than 10 years ago Hotel Chocolat(LSE: HOTC) had only four retail stores. Today, I doubt there's a reader of this article who doesn't know the brand. The company was floated on AIM as recently as May last year and at a share price of 286p has a market cap of £323m.

Hotel Chocolate released its interim results (for the 26 weeks ended 25 December) last week. These showed a 14% rise in reported revenue to £62.5m, with 10 new stores opened in the period contributing 4% of the rise and taking its network to 93 stores.

Underlying earnings increased 26% to 7.8p but historically the business has been heavily weighted to the first half. Indeed, second-half earnings have been negative and analyst full-year forecasts of 7.55p for the current year imply a continuation of the pattern. This puts Hotel Chocolat on a multiple of close to 38 times earnings, which looks a bit rich to me for earnings growth of 17%.

I like the business and the brand. There is potential for growth at home and further international expansion to accelerate in the medium term and make this company a big winner. But I just feel the price is currently a little high for the mid-teens earnings growth that's forecast for the next couple of years. One to watch for a lower entry price, in my view.

A top growth share

If you're in the market for growth stocks, but aren't tempted by Ricardo and Hotel Chocolat, you may wish to check out a company that's just been declared A Top Growth Share From The Motley Fool.

The Fool's growth experts have published their in-depth analysis of the company in question in this exclusive FREE report. It won't cost you a penny and comes with no strings attached, so what have you got to lose? Simply CLICK HERE.

G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended Domino's Pizza. 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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