- Growth stocks are likely to increase their earnings at a faster rate than the market average.
- Rakon reported a 43% increase in its revenue for the 6 months ended 30 September 2021.
- Skellerup expects an NPAT to be over 10% above the pcp for H1 FY22.
Growth stocks are those stocks whose expected earnings are likely to grow at a higher rate than the market. Growth companies have the potential to grow faster and typically reinvest their profits back into the business as retained earnings.
These companies have a competitive advantage over other companies as they grow at a substantially higher rate and possess a trustworthy customer base.
Let’s have a look at how these 2 NZX growth stocks are likely to fare in the coming year.
Image source: © 2021 Kalkine Media, Data source- Refinitiv
Rakon Limited (NZX:RAK)
A designer and manufacturer of advanced frequency control and timing solutions, Rakon announced substantial advances in revenue and earnings for the 6 months to 30 September 2021.
The Group’s revenue increased 43% to $85.4 million and underlying EBITDA rose 132% to $26.4 million in the period due to enhanced gross margins and disciplined supply management risk.
Rakon was able to fare well due to Rakon’s ability to obtain and deliver new business stemming from TCXO chip shortage while maintaining growth in its core business due to strong demand for its telecommunications solutions.
The Group expects to achieve an underlying EBITDA between $44 million and $49 million in FY22.
Shares of Rakon, at the time of writing, were trading flat on Wednesday at $1.84.
Skellerup Holdings Limited (NZX:SKL)
A designer, manufacturer and distributor of vacuum systems and polymer products, Skellerup Holdings, reported robust earnings in FY21, delivering a 38% rise in NPAT at $40.2 million for the period. It also recorded a 22% rise in operating cash flow at $58.8 million, which helped it to lower its debt levels and increase dividends.
SKL paid a final dividend of 10.5cps on 15 October 2021, up from 7.5cps. It made a robust beginning to FY22 in spite of challenges imposed by the COVID-19 pandemic.
Skellerup acquired Talbot Technologies, an expert in developing and manufacturing highly engineered plastic products, in August 2021.
SKL expects an NPAT to be over 10% above the pcp for H1 FY22.
Shares of Skellerup, , at the time of writing, were trading 0.33% higher on Tuesday at $6.09.
Investors need to make a careful selection of growth stocks based on certain metrics as sometimes investing in them can be risky.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)