2 growth stocks I'd buy before it's too late

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Today, I'm looking at two smaller companies that have significant growth potential. Both could reward investors with capital gains and dividends. 

Cybersecurity specialist

Cybercrime is a huge problem for businesses and governments today. Indeed, according to IBM CEO Ginni Rometty, it's the "greatest threat" to every company in the world right now. Looking at the stats, I tend to agree. In 2016, cybercrime cost UK businesses alone around £30bn.

That's why I believe investors should look at cybersecurity specialist NCC Group(LSE: NCC). Headquartered in Manchester, the £600m market cap company specialises in protecting businesses against the ever-evolving threat landscape. It currently serves over 15,000 clients across the world.

The group experienced 'growing pains' in 2016. It made a series of acquisitions between 2013 and 2016 before realising that it had grown too quickly. Back-to-back profit warnings saw the stock fall from 350p to 110p.

However, the business now looks to have stabilised, with Chairman Chris Stone stating this morning that it has "delivered a significant recovery from the low point of the second half of the prior year." Indeed, half-year results released today look robust. Although operating profit fell 10.8%, revenue climbed 7.2%, operating cash flow increased 20.5% and the dividend was maintained at 1.5p. Mr Stone also commented: "Strong organic revenue growth in our core assurance businesses continues to drive positive momentum in the business."

Looking ahead, I believe NCC has bright prospects. For FY2019, analysts have pencilled in earnings growth of 15%. The shares don't trade cheaply, on a forward P/E ratio of 28, yet if NCC can continue to build on its momentum, I think there's potential for further gains.

A cheap UK bank stock

Moving across to the banking sector, I also like the look of challenger business OneSavings Bank(LSE: OSB) right now. Shares in the £990m market cap lender look too cheap, to my mind.

The bank has enjoyed strong growth in recent years, with net profit surging from £27m to £121m between 2013 and 2016. A trading update in November revealed further progress, with loan book growth of 17% for the nine months to 30 September.

Yet the stock's valuation simply does not reflect this momentum. With analysts forecasting earnings per share of 48.3p for the year just passed, the estimated P/E ratio is just 8.3.

What also appeals to me here is the potential for big dividends. The bank is growing its payout at an astonishing rate. Last year, the dividend was hiked by 21%. For FY2017 and FY2018,  analysts expect growth of 20% and 27% respectively. The expected payout of 15.9p per share for FY2018 equates to a yield of a healthy 3.9% at the current share price with strong coverage of over three times as well.

When you consider that rival Aldermore was recently acquired at a P/E of around 10, OneSavings' current valuation looks compelling, given the bank's momentum. The stock is a 'buy', in my opinion.

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Edward Sheldon owns shares in NCC Group. The Motley Fool UK owns shares of NCC. 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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