One bargain growth stock I'd buy and one I'd sell

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McColl's

Investor demand for McColl's Retail Group(LSE: MCLS) has remained stable on Thursday following the release of quarterly trading numbers.

But this pause for breath is hardly surprising given the company's stratospheric share price ascent -- McColl's has seen its stock value swell by a third during the past two months alone.

Thanks to the purchase of close to 300 convenience stores from The Co-Operative Group last year, the Brentwood-based business saw total sales rattle 31.1% higher during the 13 weeks to August 27, it announced today. Revenues were up 15.8% in the year to date.

Celebrating the result, chief executive Jonathan Miller said: "The 298 newly integrated convenience stores have driven strong revenue growth, and our existing estate has continued to perform well, delivering a second consecutive quarter of positive like-for-like sales growth."

Like-for-like sales growth in the quarter was much more muted by comparison, having said that. McColl's saw such sales edge just 0.7% higher during the period, with revenues rising 0.7% in its supermarkets and 0.3% across its newsagents.

Looking ahead, Miller added: "We continue to look at opportunities to further enhance organic growth, and are pleased by the progress we are making with our convenience store refresh trial.

"Customer feedback has been positive and the early performance has been very strong, with significant sales uplifts and increased participation in key convenience categories, including fresh and chilled food."

Still too risky

City brokers expect McColl's to record an 8% earnings uplift in the year ending November 2017, and to follow this with a 29% advance in the following 12-month period.

And current projections leave the business dealing on what would appear very attractive valuations. Indeed, a forward P/E ratio of 15.3 times is near enough on the widely-considered value benchmark of 15 times.

For me, however, this is not low enough to tempt me to invest right now.

While sales across the country's convenience stores may be outperforming the larger stores owned by the likes of Tesco and Sainsbury's, such stores are not immune to the rising competitive pressures in the British grocery industry. And the environment is becoming ever-tougher as the industry's big players boost their own positions in the convenience segment, and the likes of Aldi and Lidl continue on their aggressive expansion programmes.

With sterling's decline also pushing up costs, and rising inflation heaping extra pressure on shoppers' spending power, I reckon the difficulties McColl's faces to keep sales on an upward tilt are too great right now.

Media mammoth making noise

I believe that those seeking a genuinely-hot growth stock should check out Future (LSE: FUTR) instead.

The number crunchers believe Future will see earnings tear through the roof in 2017, with current estimates suggesting a whopping 153% advance in 2017. And the Bath business is expected to follow this with a 35% rise next year.

While a forward P/E ratio of 21.1 times may look toppy on paper, Future's corresponding PEG multiple of 0.1 indicates that it's actually a brilliant bargain given its projected growth trajectory.

Indeed, unlike McColl's, I reckon the media giant is worthy of serious consideration right now. It completed the purchase of the Home Interest Division from Centaur Media just this month and its stunning progress around the globe and potential for more earnings-driving acquisitions should add to its appeal.

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Royston Wild has no position in any of the 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.