Two growth stocks I'd buy and hold for the next decade

One place to look for growth is in among turnaround stocks which have been suffering from any sort of cyclical downturn. And one of those that has caught my eye for a while is Gulf Marine Services(LSE: GMS).

Gulf is a company that supplies services to the offshore oil and gas industry, in the form of providing self-propelled, self-elevating support vessels. And with the oil price slump leading many producers to cut back on capital investment and operating costs, the company has been suffering -- the shares have lost 60% in the past five years, to 52p.

But after a trading update in August led to a fresh dip, the price has been picking up again -- and though September's interim results made for superficially grim reading, an operational Tuesday hints at the beginnings of a new optimism.

Improving demand

Tender levels for all of the firm's vessel classes are said to be "improving in the oil and gas sector in the Middle East," although timing of contract awards looks like it might still be erratic for a while.

Utilisation levels for Gulf's large and mid-size vessels is up to 74%, which is encouraging, though debt still troubles me -- at £381.3m at 31 October, it needs to come down for confidence to strengthen some more, I think.

The full year is still expected to be tough, with trading in line with expectations. But a big earnings turnaround forecast for next year would see the P/E drop to under 12. If that comes off, I think we could easily be looking back on 2017 as a very good year to buy Gulf Marine Services.

All-out growth

Focusrite(LSE: TUNE) looks more of an out-and-out growth candidate, having seen its earnings per share rising strongly since flotation on AIM in December 2014. And over the same period, the shares have more than doubled to today's 303p.

But with a more modest year forecast for 2018 and the share price flattening off a little, we could be looking at a buying opportunity.

The music and audio products supplier has just revealed a 33.5% rise in pre-tax profit to £9.5m, accompanied by a 30% rise in diluted earnings per share to 14.8p.

The dividend for the year has been hiked by 38% to 2.7p per share, and though that's a yield of only around 1%, it highlights for me a key attraction of the company -- it's highly cash generative. Focusrite ended the year with net cash of £14.2m on the books, way up from the £5.6m it had a year previously -- I'm not surprised my colleague Paul Summers recently described the company as having "many of the hallmarks of a quality business."

Use of cash

CEO Tim Carroll told us that "since the year end, revenue and cash have both grown further," adding that the company's "solid momentum has continued into the current year."

Forecasts suggest a forward P/E of around 21, but I see the analysts' projections as being too conservative at this stage. The firm tells us it is targeting a dividend cover of four to five times in order to focus on future growth, and it looks to be targeting its cash in the right way to me.

I'm usually wary of early growth stories, but I do like the look of Focusrite at this stage.

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Alan Oscroft has no position in any of the 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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