Two growth stocks I'd buy to retire on

When it comes to growth, few companies have come close to producing the same record of expansion as 4imprint Group (LSE: FOUR).

Over the past five years, shares in this company have returned more than 400% excluding dividends. Including dividends, the stock has produced a total return of 38% per annum over five years and 27% over 10 years, enough to turn an initial investment of £10,000 into £150,000 in the space of a decade.

Unfortunately, today shares in the marketing business are falling, disrupting this impressive historical performance after it reported worse than expected results for the year ended 30 December.

For the period, profit before tax grew by 19% as revenue expanded by 12% to $628m. Basic underlying earnings per share jumped 18% to $1.03 (or 74p).

While these figures may not have been what the City was expecting, they are still highly impressive and show that 4imprint's growth is not going to slow down any time soon. Indeed, management has a target to achieve revenue of $1bn for 2022, up around 60% from the figure reported for 2017, which should support earnings per share growth at least the same rate over the next four years.

How high can you go?

Using a rough, back of the envelope-type calculation, assuming 4imprint's net profit margin remains constant at 4.6%, on revenues of $1bn the firm is set to produce a net income of $46m or $1.63 (117p) per share for 2022. Using these highly conservative figures, the shares are currently trading at a 2022 P/E of 15.5, which seems appropriate for this high-growth business.

That being said, the above does not reflect any possible margin expansion from economies of scale as the group grows, and it also does not include a reduction in the company's tax rate following US Tax Reform. For 2017 4imprint booked an effective tax rate of 28%, a rate that is likely to fall substantially now the US' federal corporate tax rate has been reduced from 30% to 21%.

Put simply, over the next five years, earnings are on track to grow substantially, and this growth should mean that the company can continue to achieve double-digit annual returns for investors as it has done in the past.

Special skills

Another growth stock I believe would make an excellent pick for your retirement portfolio is Avon Rubber(LSE: AVON). This company has been around for 127 years, changing with the times to survive. Today Avon makes high-tech gas masks for the defence, industrial and fire service markets, and it produces milking systems for dairy farmers.

These products may be niche, but they require a high level of skill to produce, skill Avon has refined over its long history. The company's position in these markets also gives it a certain degree of pricing power. Thanks to this power, net profit has risen at an average annual rate of 22% over the past five years, and the firm's operating margin has increased from 10.9% to 12.1%, funding dividend growth of 28% per annum over the same period.

At the time of writing, the shares support a dividend yield of 1.4% and trade at a P/E ratio of 16.5, which isn't exactly cheap, although taking into account Avon's history of steady growth, as well as its leading position in niche markets, I believe this is a price worth paying for the shares.

Double your money

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Rupert Hargreaves owns no share 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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