1 'secret' small-cap growth stock I'd consider with Boohoo.com plc

Growth stocks can come in all shapes and sizes. Shares of online fashion retailer Boohoo.com (LSE: BOO) have risen by 680% over the last three years, and the firm is now worth £2bn.

I think further growth is likely, but I've also found a £45m minnow which could be worth watching.

Can Boohoo keep climbing?

Boohoo.com's group sales rose by a stunning 100% during the final four months of last year, compared to the same period in 2016. The secret to the group's continuing expansion seems to be that it's discovered a successful growth formula which it is now duplicating.

During the period in question, Boohoo brand sales rose by 25% to £142m. But sales at the newer PrettyLittleThing brand rose by a stunning 191% to £73.8m. And the group already has a third brand lined up that's still at an early stage. Sales from Nasty Gal reached £11.9m during the four months to 31 December, from start-up in March 2017.

Although the UK still accounts for 59% of revenue, sales growth in the rest of Europe and the USA is equally strong. If Boohoo's brands can establish a strong reputation in these markets (and Nasty Gal already has a head start as it's a US brand), they could become much larger.

Are the shares still a buy?

Boohoo.com's managers are very experienced fashion specialists with a big stake in the business. Under their guidance, annual profit has outpaced sales, rising from £8.4m in 2015 to £27.3m over the 12 months to 31 August.

Strong cash generation has allowed the group to build a net cash balance of more than £100m, providing funding for warehouse upgrades and expansion.

Although a 2018/19 forecast P/E of 49 looks demanding, earnings are expected to grow by around 30% this year and next year. If this pace can be maintained, today's share price of 180p could soon look quite affordable.

Cleaning up

One growth stock you may not have considered before is AIM-listed Filta Group (LSE: FLTA). This company's main business is managing deep fat fryers in restaurant kitchens. This is an essential service that has to be performed regularly, and the group currently visits more than 5,000 customers every week.

In a trading statement today, Filta said today that sales for the year ending 31 December are expected to have risen by over 30% to "in excess of £13.25m". Profits are expected to be in line with market forecasts of £1.6m.

Growth over the last year looks fairly healthy. The number of Mobile Filtration Units rose by 15% to 392 last year. In the UK, the recently acquired FiltaSeal business is said to have delivered "a strong performance".

US sales currently account for around 80% of revenue, with the remainder coming from the UK. Filta is also expanding into Canada and Germany. The group uses a franchised business model, which normally means that expansion costs are low.

I believe the outlook for shareholders is fairly positive here. One concern is that a slowdown in the restaurant market or a spate of closures could derail Filta's growth plans. It's also worth noting that a fair amount of growth is already priced into the shares, which trade on a forecast P/E of 24.

However, the group's franchise model should limit losses if the market slows. On balance, I believe these shares may be worth a closer look.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo.com. 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.