2 hot growth shares I'd buy in February

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Barclays

While the FTSE 100 may have reached a record high already in 2017, there are still a number of growth stocks which offer capital gain potential. Certainly, valuations may have generally moved higher, but wide margins of safety and rising earnings among growth companies could still spark rising share prices. Here are two prime examples which could outperform the wider index during the course of 2017.

A rapidly changing business

BT(LSE: BT.A) has a business model in a state of major transformation. The telecoms company's purchase of the UK's largest mobile operator, EE, provides it with significant growth opportunities. It also means BT has a true quad-play offer on a scale which can compete with any of its rivals. This should allow it to experience considerable cross-selling opportunities in the medium term, which are expected to boost its bottom line.

However, in the current year BT is due to report a small fall in profit. Its earnings are forecast to decline by 3%, which could hurt investor sentiment in the short run and provide a buying opportunity. That's because the company is set to return to profit growth in 2018 with a rise of 6%, followed by further growth of 9% in the year after. Despite this positive outlook, BT trades on a price-to-earnings growth (PEG) ratio of just 1.3, which indicates that it offers growth at a very reasonable price.

Certainly, the media sector is highly competitive and product differentiation is challenging. However, BT is enjoying success in winning new customers to its superfast fibre broadband who then could buy additional services such as mobile and pay-TV from the company. As such, it seems to be a good time to buy the stock, especially since it offers a wide margin of safety.

A rapidly growing banking stock

2016 is likely to have been a difficult year for Barclays(LSE: BARC). Its bottom line is due to have fallen by 20% and it was also the year where it announced a dividend cut. This may have been unpopular at the time, but it looks set to put the bank on a firmer financial footing for the long term and allow it to better face what could prove to be an uncertain global economic future. As such, the company's risk profile is likely to become more favourable and this makes it a more appealing investment.

Barclays is expected to increase its earnings by 51% in 2017, followed by further growth of 15% next year. This puts it on a PEG ratio of just 0.7, which indicates that now could be a good time to buy it. The company's share price may also react positively to a planned rise in dividends, with them due to more than double in 2018. This puts Barclays on a forward yield of 3.3% from a dividend which is expected to be covered three times by profit. Therefore, as well as being an attractive growth stock, it could become an enticing income play, too.

But will these 5 shares outperform BT and Barclays?

Despite their appeal, there are five other stocks which could be worth taking a closer look at. In fact, the analysts at The Motley Fool have written a free and without obligation guide called 5 Shares You Can Retire On.

The companies in question offer strong long-term growth outlooks, enticing valuations and wide margins of safety. They could therefore make a positive impact on your portfolio returns.

Click here to find out all about them - it's completely free and without obligation to do so.

Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.