One hot growth stock I'd buy right now, and one I'd sell

hot sun
hot sun

If you want to avoid the UK banking sector, how about looking to Eastern Europe? It's BGEO Group(LSE: BGEO) I'm thinking of, the FTSE 250 holding company that owns Bank of Georgia.

Georgia is very much a developing economy, and though Bank of Georgia is the country's largest retail bank, it still looks very much like a growth stock in the early stages of its lifecycle. Earnings have grown modestly over the past few years, but the real growth looks like it's yet to come -- analysts are expecting a 38% EPS rise for the year ended December 2012, with double-digit rises pencilled in for the next two years too.

That puts the shares on PEG ratios that are more often found with small growth companies -- BGEO is on a ratio of just 0.3 for 2016 results, with 0.4 and 0.5 on the cards for the next two years, based on a share priced of 3,581p.

Dividends too

The annual dividend has been a little erratic recently, but predictions suggest that the 2015 payment of 79p will be boosted by nearly 70% to 133p by 2018 -- with the fall in the pound contributing a little to that.

This year is going well so far, with first-quarter profit up 24.3% to GEL108.2m (that's Georgian Lari), which is approximately £35.6m, and basic EPS rose by 25.7% to GEL2.64 (87p).

There are always extra risks to face when you invest in the less well managed emerging markets of the world's developing economies, and that's certainly the case here -- but then, UK banking regulations didn't do a very good job here so recently.

And I reckon there's more than enough in growth prospects at BGEO to cover the risk.

High flyer

The growth stock I'd sell now is Scapa Group(LSE: SCPA). But first let me tell you what I like about it.

Scapa makes adhesive products for the healthcare and industrial markets -- and has achieved several years of double-digit growth which has seen earnings per share soar from 5.5p to 14.8p in just four years.

On top of that, the dividend, which stood at just 0.5p per share in 2013, had quadrupled to 2p for the year ending March 2017.

This year's results included a 13% rise in revenue, leading to a 37% jump in adjusted earnings per share, with Scapa's industrial division achieving its target of double-digit margins (something the healthcare division already enjoyed). And chief executive Heejae Chae told us "We have set the goals for the next phase of our growth which we are confident that we can deliver."

Too expensive

I'm convinced Scapa's long-term future is solid, but it has that 'top-heavy growth share' look about it that I've seen so many times over the years.

Growth is impressive, investors pile-in, there's another cracking year of growth, more jump aboard... and eventually when growth slows and one set of results comes in a little behind expectations, everyone jumps ship and a big chunk is shaved off the share price.

Scapa shares have nine-bagged over the past five years to today's 497p, putting them on a P/E of 30 (which implies another doubling in EPS is already built into the price) at a time when forecasts are indicating slowing earnings growth for the next two years.

For me the signs of an exuberant bull run coming to an end are all there.

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Alan Oscroft 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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