Have decades to go until retirement? Consider these top growth stocks
From sky-high housing prices to stagnant real wages, there’s plenty of reasons for economists to fret over the financial future for Millennials like myself. But young people interested in investing still have one huge advantage over older investors. Time.
The power of compound interest isn’t to be underestimated. With decades to go before we retire, there’s plenty of reason to sock away as much cash as possible into the market for the long-term, especially since most of us are as likely to see a unicorn as receive a gold-plated defined benefit pension like our parents.
A tech-focussed option
One stock that I believe could grow very nicely over the coming years — and possibly decades — is e-mail marketing firm dotDigital (LSE: DOTD). Nowadays, with fewer and fewer consumers seeing traditional adverts via declining mediums such as television, print or radio, companies have to pay to get their names where they know we pay attention.
One of those places is our e-mail inbox, which is where dotDigital comes in. The company sells software that allows marketing departments to keep in contact with previous or potential customers, as well as a slew of very granular tools that give them plenty of data on which types of e-mails lead to sales conversions, or keep customers interested in their brand.
It’s these tools that give dotDigital an advantage over competitors, as they’ve proven very popular with marketing departments at both small businesses and giant multinationals. In the year to June, the group’s revenue jumped by 35% to £43.1m, with management guiding for profit growth in line with analyst expectations of around 25%.
This growth came despite the introduction of the EU GDPR implementation. And while it’s still early days, dotDigital says its seeing no slowdown in demand for its services. Indeed, over the long term, regulations like GDPR will probably help incumbents due to higher barriers to entry and small firms deciding to lessen their compliance risks by turning to specialists like dotDigital.
Overall, this leads to me believe the future is bright for dotDigital as the company’s management team continues to roll out new products and make acquisitions that bring in more recurring revenue and increase its stickiness with customers.
Shipping is big business
A more established company that still offers significant growth prospects is £7bn-market-cap DS Smith (LSE: SMDS). The company manufactures items such as corrugated cardboard that are used to store and ship products to and between factories, stores and consumers. DS Smith has benefitted from overall market growth thanks to booming e-commerce-related shipping. It also has considerable above-market growth opportunities, due to market share growth from organic expansion and acquisitions.
In the year to April, this resulted in constant currency revenue growing 17% to £5.7bn, with adjusted operating profit bumping up 16% to £0.5bn. This trend looks set to continue in the near term as management has announced it’s purchasing European packaging giant Europac for £1.66bn. This fits in with the company’s recent acquisition-led push into the US and provides a solid base from which to continue consolidating a fragmented market.
With high growth potential and a record of consistent dividend hikes that result in a 2.83% yield at present, I reckon DS Smith has the potential to be a knockout holding for many years to come.
But DS Smith can't match the 1,500%+ gains from this growth stock
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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended dotDigital Group and DS Smith. 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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