2 under-the-radar growth stocks
While the stock market is relatively efficient, it is difficult for investors to know about all of the growth opportunities available at any one time. This could present a chance to buy shares in companies which are not particularly well-covered by analysts and which offer strong growth forecasts at a reasonable price.
Certainly, smaller companies fitting this criteria may be relatively risky, but their returns can also prove to be impressive. With that in mind, here are two stocks which could be worth a closer look.
Reporting on Wednesday was digital marketing services company Jaywing(LSE: JWNG). Its results included a rise in revenue of 24%, with the company's cash generation also improving. This allowed it to reduce net debt by £1.79m, with it now representing 0.7 times EBITDA (earnings before interest, tax, depreciation and amortisation). The company's gross profit increased by 13%, with two-thirds of gross profit now visible six months in advance. This could help the business to budget more effectively for the future and lead to a more stable business model.
In the last year, it has made two strategically important acquisitions. They could help to improve its long-term growth outlook. It is also investing in Marketing Tech products and while this is causing a slight reduction in margin, it could lead to improved financial performance over the long run.
Looking ahead, Jaywing is forecast to record a rise in its bottom line of 4% in the current year, followed by additional growth of 5% next year. With the company trading on a price-to-earnings (P/E) ratio of around nine, it seems to offer a wide margin of safety. Certainly, it is relatively high-risk due to its size, and downgrades to its outlook are possible. But it could be worthy of consideration for less risk-averse investors.
Also offering upbeat future prospects is property development and investment company Urban & Civic (LSE: UANC). Clearly, the outlook for UK commercial property has deteriorated to at least some extent over the last year. The uncertainty caused by Brexit and the political risks which have emerged because of the general election mean that investor confidence in the sector is at a low ebb.
Despite this, the company could deliver rising profitability. The UK continues to have a favourable monetary policy, while fiscal policy may also be supportive of growth. This means that the property sector may be oversold, given its medium term outlook.
With Urban & Civic expected to report a rise in its bottom line of 64% in the next financial year, it could benefit from improving investor sentiment. Since it has a price-to-earnings growth (PEG) ratio of just 0.2, it could prove to be a shrewd investment. While the sector may have an uncertain outlook, the company's risk/reward ratio appears to be favourable over a multi-year timeframe.
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Peter Stephens 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.