One growth stock I'd buy ahead of Astrazeneca plc

The Motley Fool
AstraZeneca Medicine Chemistry.
AstraZeneca Medicine Chemistry.

What a rollercoaster few months it's been for FTSE 100 pharmaceutical giant Astrazeneca (LSE: AZN). After a decent rise over the first half of 2017, the share price plummeted in late July after the company reported disappointing trial outcomes relating to its flagship lung cancer treatment Imfinzi.

Was the drop overdone? A rebound in the stock over recent weeks would suggest so. Clearly, the promise of a 4.2% yield was sufficient to entice quite a few investors to return, further underlining how disappointing news can often be quickly forgotten by the market.

But while the company remains a go-to destination for many income investors (and big pharma is traditionally regarded as a safe bet during uncertain times), I think those looking for top growth stocks -- and serious capital gains -- should consider veterinary practice operator CVS Group(LSE: CVSG).

Over the last five years, shares in the Diss-based firm have almost eight-bagged, demonstrating yet again just how quickly high-quality companies with strong growth strategies are able to multiply your wealth.

Today's full-year results go some way to explaining why the shares are so coveted (and up 6% in early trading).

"Further outstanding performance"

If only all businesses performed this well. Revenue jumped 24.6% to just under £272m in the year to the end of June with like-for-like sales growth of 6.3% being recorded. Operating profit soared 46.2% to £17.2m.

Aside from the headline figures, CVS managed to grow the number of members of its Healthy Pet Club scheme by just under 21% to 306,000 over the last financial year. As part of its strong growth strategy, the £850m cap also acquired and integrated 62 surgeries, building on the 67 it purchased in 2016. With another 10 sites added since the end of the period (including an addition to its rapidly-expanding equine business), CVS can now boast a huge estate of 432 surgeries.

Elsewhere, the company's investment in three crematoria last year appears to be paying off with revenue from this side of the business climbing 27% to £6.3m. The recent launch of its own brand pet insurance (MiPet Cover) also appears to be an excellent move, even if it's too early to assess how this has been received by the public and won't contribute to profits in the current financial year. The fact that it is the only insurance on the UK market to be designed by vets should help it stand out to pet owners.

In addition to reflecting on "another record year for revenue and operating profits", Non-Executive Chairman Richard Connell was also keen to emphasise the "limited" effect Brexit would have on CVS, with the biggest issue being the employment of European vets. On this point, CVS has joined forces with industry peers and the Royal College of Veterinary Surgeons to lobby the Government to "ensure there are no adverse impacts".

Thanks to the resilient characteristics of businesses focused on serving our furry friends, the high likelihood of further acquisitions to continue its expansion into Europe, the introduction of own brand products and the ongoing development of its referrals business, I'm in agreement with management that the outlook for CVS looks "very promising".

Sure, the high valuation attached to its shares means the company can't afford to slip up but with earnings growth looking substantially more likely than at Astrazencea, I'd know where I'd put my money.

Are you ready for Brexit?

Based on today's statement, it looks like CVS Group will come through Brexit relatively unscathed. Unfortunately, the same can't be said for many stocks on the market.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.