Have £2,000 to invest? Here are two growth stock to consider for September
Today, the average interest rate available on savings is less than 1%. So if you’ve suddenly come into some money, it’s probably better to invest your funds instead.
Here are two growth stocks I reckon are worth considering adding to your portfolio in September.
A price worth paying
You might not have heard of research tool provider Abcam(LSE: ABC) before, but this company provides a vital service to biotech laboratories around the world. The group provides research outfits with research-grade antibodies that they need to conduct experiments.
This is a highly specialist market, and Abcam is taking it over. Growth has been explosive over the past six years. Revenue has expanded from £98m in 2012, to £217m for 2017. Analysts are expecting sales to hit £234m in 2018 and £261m in 2019. Profit has grown just as fast. Since 2012, net profit has doubled and is expected to triple by 2019.
The one thing that puts me off this company is its valuation. Right now, shares in Abcam are changing hands for 48 times forward earnings. Usually, I wouldn’t recommend a stock that commands this kind of premium. However, I believe Abcam’s unique business model is worth coughing up for.
Indeed, the long-term growth potential of the business could be tremendous. It is only just starting to break into the Chinese market, and nearly £100m of cash on the balance sheet provides plenty of firepower for acquisitions. Sales in China only accounted for 13% of total group revenue in 2017, but expanded 24% year-on-year in the first half — this gives some idea of how big the Chinese opportunity could be for the firm.
With demand for Abcam’s services exploding, now might be the time to consider adding this stock to your portfolio.
International expansion
My other growth pick for September is Homeserve(LSE: HSV). Like Abcam, Homeserve’s growth over the past five years has been astounding. Net profit has leapt from just £10m in 2014, to £96m for fiscal 2018. And analysts are expecting further growth in 2018 and 2019. Earnings per share (EPS) are projected to rise 22% in 2019 and 11% in 2020. If the firm hits these targets, net profit will have grown by 1,220% in five years.
I believe there is also plenty of scope for the company to grow further after 2020. The group, which provides home emergency, repair and heating installation services, has only just started to expand in the United States where management sees plenty of scope for growth through acquisitions.
It has only really scraped the surface of the global home care market. For the year to the end of March 2018, the company reported 8.4m customers worldwide. With a total of 126m households in the US alone, the sky is the limit for Homeserve’s growth.
With this being the case, I reckon that even at a P/E of 28, shares in Homeserve are worth snapping up. There’s also a dividend yield of 2.2% on offer.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Homeserve. 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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