2 storming growth stocks with exciting potential

Arrow Global Group(LSE: ARW) shares have more than doubled since July last year, ending a stagnation that has dogged the shares since flotation in October 2013.

The upwards re-rating was long overdue, in my opinion, as the debt purchaser and manager has been exhibiting impressive earnings growth, its dividend has been building up from a modest beginning, and the shares have never been on a stretching P/E multiple.

Successful expansion overseas (it now has operations in Portugal, the Netherlands, France and Italy) has probably been the trigger for the recent bull run, and impressive 2016 results will have added to the optimism after chief executive Lee Rochford described it as "a landmark year".

Cracking growth

Revenue rose by an impressive 42.6%, with underlying earnings per share up 28.5%. Mr Rochford told us the firm is confident of delivering "high teens EPS growth and a progressive dividend policy... over the medium-term," offering the best of both worlds -- growth and income.

In fact, we're looking at PEG ratios of only 0.4 for this year and next, when anything under 0.7 is usually seen as a key growth indicator, with the shares dropping to a P/E of under 10 on 2018 predictions.

On top of that, dividend hikes that are way ahead of inflation should take the well-covered yield to 3.8% by 2018 -- and at this rate, it could be exceeding 5% almost before we know it.

The current year is off to a great start too, with first-quarter revenue up 45% over the same period last year, and underlying pre-tax profit up 37%. And organic purchases of £77.4m across the firm's markets should hopefully set it up for continuing healthy profits.

I see strong growth potential coupled with rising dividends, from shares which, at 404p, look cheap.

Brexit effect?

The recruitment business might not seem a likely source of growth opportunities, but I'm liking Impellam(LSE: IPEL) right now. Specialising in upmarket appointments on short-term or permanent contracts, the company has been able to grow its earnings per share by 70% between 2013 and 2016, while boosting its dividend yield similarly over the same period.

The share price has easily kept up with that, more than doubling since the end of 2013, to 783p. But since last April's peak, it's fallen back a little overall, and that's created what I see as a bargain P/E -- forecasts for this year suggest a multiple of only 8.3, and that would drop even lower to 7.6 on 2018 predictions.

Dividend yields should be approaching 3% by then, with cover by earnings of more than 4.5 times, so that's not remotely stretched.

Strong year

The year just ended showed a 21% rise in EPS with the dividend up by the same margin, after revenues grew by 20%.

Some of that was due to acquisitions, which Impellam appears to be good at managing. It's turning the company more outwards and increasingly global, from being essentially Europe-focused. The firm spoke of "significant progress in expanding the scale and breadth" of its operations in the US, Australia and the Middle East.

I see that move as good from a sentiment point of view as well as for the bottom line, as I can't help thinking that Brexit worries must be weighing heavily on the shares' low rating at the moment. I don't know when any re-rating might come, but I can see a rewarding decade ahead for Impellam shareholders.

More tasty picks

There are growth candidates of all shapes and sizes out there, and the tempting pick uncovered in our Top Growth Share From The Motley Fool report has been raking in the cash for years.

The past five years have brought in double-digit annual earnings growth, and the City's experts are predicting two more years of solid growth ahead of us. On top of that, a progressive dividend policy adds an extra attraction to the mix.

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Alan Oscroft 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.

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