Are Joules Group plc and Boohoo.com plc top growth picks for shrewd investors?

Investors in some of the hottest growth stocks on London's junior AIM market have enjoyed tremendous gains over the past year on the back of ahead-of-expectations trading updates and spectacular results.

Keywords Studios(+178%),Gear4Music(+594%),Blue Prism(+457%), Purplebricks(+266%) andFevertree Drinks(+159%) have been among the big winners. Today, I'm looking at whether the shares of two flying fashion retailers can continue to soar.

Stylish start

Last month, premium lifestyle brand Joules (LSE: JOUL) issued a pre-close trading update for its financial year ended 28 May. It said it anticipated reporting profit before tax "comfortably ahead of its previous expectations."

Today's results hit analysts' upwardly revised forecasts. Revenue of £157m was bang on consensus and profit before tax of £10.1m was slightly ahead. A current share price of 303.5p (valuing the business at £266m) is little changed on the day but 90% up on the 160p IPO price at the company's flotation in May last year.

Plenty of growth in prospect

Ahead of today's results, analysts were forecasting Joules to increase revenue to £179m for the year to May 2018, followed by £202m for fiscal 2019. This gives price-to-sales (P/S) multiples of 1.5 and 1.3, which look attractive for a company expected to deliver double-digit top-line growth.

A price-to-earnings (P/E) multiple of 29, falling to 23 doesn't look overly demanding either. The board declared a small dividend in today's results (running yield 0.6%), sensibly retaining the bulk of earnings to invest in driving further growth.

And the company has plenty of growth in prospect. Retail store sales and wholesale both advanced by a high-teens percentage last year and there was particularly strong growth of 29% in e-commerce and 36% in targeted international markets, notably North America, Germany and France.

In addition to its quirky and colourful take on sober British heritage style winning new customers at home and abroad, Joules is also expanding the brand beyond its core offering of clothing, footwear and accessories into such areas as homewares and toiletries. With its strong growth prospects and reasonable sales and earnings multiples, its shares look very buyable to me at their current level.

Eye-watering

In the fast fashion sector of the retail market, online-only operator Boohoo.Com(LSE: BOO) has delivered an outstanding gain of 350% for investors in the IPO at 50p in March 2014. And for anyone who took advantage of an early stumble by the company, the shares have 10-bagged.

At a current price of 225p, Boohoo is valued at £2.6bn -- 10 times the market cap of Joules and one of the biggest companies on AIM. It's also far more highly rated than Joules. Boohoo's P/S multiple is 5.1, based on forecasts for its financial year ending February 2018, and 3.8 for fiscal 2019. The earnings multiples are 77 and 62 and no dividend is forecast.

However, I wouldn't dismiss Boohoo's prospects of delivering further share price gains out of hand. This is because in addition to its tremendous organic growth, Boohoo has acquired a controlling stake in early-growth brand PrettyLittleThing, bought the assets of US brand Nasty Gal and is constructing a new automated super-site that will give it warehouse capacity to support net sales of over £2.5bn by 2020.

Still, while being a big fan of the company and bullish on the stock at lower prices, I would see it as a 'hold' on the current rating.

Could there be a better growth opportunity?

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended boohoo.com and Keywords Studios. 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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