2 growth stocks you could retire on

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carpet

Carpets may not be the most exciting product to peddle, but for shareholders of UK carpeting manufacturer Victoria (LSE: VCP), there will be no complaining. Shares of the firm are up over 800% in the past five years after an ambitious management takeover saw the once sleepy firm embark on a dramatic buying spree that has rapidly consolidated the highly fragmented industry.

By buying up small carpet manufacturers and combining back office functions, increasing purchasing power and consolidating manufacturing facilities, it has dramatically increased its sales and cash flow in recent years. Management has re-invested these proceeds back into new acquisitions that have led the firm's sales to leap from £70.9m in 2013 to £255m in 2016.

Cost savings from combining these back office functions have also led to EBITDA margins rising from 5.8% to 12.6% in the same four-year period. And although margin growth is likely to moderate in the coming years, there's still room for profits to grow at a rapid clip as newly-acquired businesses are integrated and the company sets its sights on the massive European flooring market.

Victoria took its first tentative steps across the Channel with the purchase of two Dutch artificial grass manufacturers earlier this year for £9.7m. If past acquisitions are anything to go by, Victoria's management team will use its existing UK distribution networks to increase cross-selling of artificial grass as well as using the new European links to begin selling its UK-made carpets into Europe.

It's still far too soon to say whether this move will work out, but given the company's phenomenal success with previous acquisitions, I'm quite optimistic. Add in a profitable business with low leverage and a highly-skilled chairman who owns 29% of the shares and I'd take a close look at Victoria today while its shares trade at a very reasonable 19 times forward earnings.

Diversifying for long-term growth 

Another wildly successful AIM share that I reckon could continue to grow for many years to come is tech firm First Derivatives (LSE: FDP). As its name suggests, the company started off providing software to the finance industry and its flagship Kx data analysis software has proven a hit with banks, regulators and stock exchanges over the years.

Repeated double-digit sales growth has powered the group's shares up over 490% in the past five years alone. And while sales to the finance industry are still going strong, up 30% year-on-year in the year to February alone, I reckon it's the group's non-financial customers that make FDP a stock that could continue to deliver such significant shareholder returns over decades.

Indeed, with data analysis the name of the game for just about every industry these days, the company is already having great success finding clients such as utilities, defence companies, and highly-automated manufacturers. The firm's marketing business has already proven the cross-industry potential of Kx as sales rose 39% last year to £30.7m, representing over 20% of group revenue.

With the core Kx software simply being tweaked to meet the needs of new clients, the company is also highly profitable with EBITDA margins of 18.9% last year. With its potential addressable market nearly limitless as it diversifies its client base, I believe investors could do very, very well by First Derivatives, despite its shares trading at a pricey 45 times forward earnings.

But if you prefer your growth stocks to trade at more down-to-earth valuations, I recommend checking out the Motley Fool's Top Growth Share of 2017. This founder-led business has increased sales every single year since going public in 1997 but its shares still trade at just 19 times forward earnings.

To discover why the Fool's Head of Investing reckons the shares could triple in price in the coming decade, simply follow this link for your free, no obligation copy of his report.

Ian Pierce has no position in any 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.