Today I'm looking at two multi-bagging stocks with highly specialist businesses.
Both companies have delivered gains of at least 200% over the last five years. Although these high-performing stocks aren't cheap by conventional measures, I believe both have the potential to deliver further gains.
Sales up 30%
Gooch & Housego (LSE: GHH) makes "optical components and systems" used in a wide range of industries. These include telecoms, oil and gas, defence and life sciences. The group's products are highly technical, but today's accounts for the year to 30 September were refreshingly simple.
Sales rose by 30% to £112m last year, while pre-tax profit was 24.8% higher, at £12.6m. Adjusted earnings per share rose by 16% to 49.4p and the dividend climbed 13% to 10.2p.
Cash generation remained strong and the Somerset-based firm ended the year with net cash of £14.9m, 28% above last year's figure of £11.7m.
The outlook for the current year is also positive. Gooch & Housego reported a record year-end order book of £72.1m, 36.5% higher than at the same point in 2016.
What do these figures tell us?
The stock has risen by nearly 4% today to 1,450p. This gives the shares a trailing P/E of 29, with a dividend yield of just 0.7%. Clearly this is a stock for growth investors.
One potential concern is that this business isn't massively profitable. Last year's operating margin was 11.8%, consistent with 2016. Today's results appear to have been boosted by acquisitions, and I suspect the company may require further acquisitions to maintain an attractive growth rate.
However, the firm's strategy of pursuing organic and acquisition-led growth appears to be working well at the moment. Analysts expect adjusted earnings to rise by a further 10-15% this year, putting the stock on a forecast P/E of around 25. At this level, I'd continue to rate the shares as a buy for long-term investors.
Everyone hates queuing
Queues for popular rides at theme parks can involve very long waits. This isn't much fun, and so perhaps it's not surprising that Accesso Technology Group (LSE: ACSO) has been so successful.
Shares in this firm -- which makes virtual queuing systems that eliminate the need to stand in line -- have risen by 535% over the last five years. Shareholders who bought the stock when it floated in 2002 have enjoyed an incredible 2,100% gain, if they've held onto their shares.
More to come
The Reading-based firm is increasingly the virtual queuing partner of choice for many large visitor attractions. Sales rose by 17.4% to $46.6m during the first half of this year, while adjusted operating profit climbed 30% to $6.5m. Adjusted earnings per share -- excluding acquisition costs -- rose by 40.8% to 22.25 cents during H1.
Accesso's adjusted earnings are expected to be broadly flat this year, but in 2018 analysts expect to see the group's earnings climb by a staggering 50% as recent acquisitions and contract wins kick in. This puts the stock on a forecast P/E of 39.
That may seem pricey, but it implies a price/earnings growth (PEG) ratio of just 1.1. That's close to the threshold of 1 that legendary growth investor Jim Slater used to find cheap growth stocks.
In my view, investors should continue holding while the company is performing so well.
We think this stock could triple
If you're looking for today's top growth buys, I don't think you can afford to ignore this stock. Our analysts believe this FTSE 250 firm could rise by up to 200%.
The market is taking a mixed view on this stock at the moment, but our number crunching suggests investors are underestimating the potential profits on offer.
Roland Head has no position in any of the companies mentioned. The Motley Fool UK has recommended Gooch & Housego. 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.