- Investing in Growth stocks is considered crucial for wealth creation.
- Most of these growth stocks have delivered double-digit returns in the past one year.
Growth stocks are a preferred choice for young investors seeking wealth creation in the long term. These stocks may or may not distribute their earnings as they reinvest their profits for expansion and capacity building.
Smart investors usually have a significant amount of portfolio allocation in these stocks due to their strong earnings potential. Just like technology stocks, growth stocks are also a popular choice among investors with a greater risk appetite.
However, the selection of the right growth stock for investment could be confusing and cumbersome. Therefore, it is imperative for investors to seek professional guidance before taking exposure to these stocks.
Copyright © 2021 Kalkine Media Pty Ltd.
In this article, we shall put our lens through 5 businesses listed on the LSE, Croda International Plc (LON: CRDA), Henry Boot Plc (LON: BOOT), Restore Plc (LON: RST), Victrex Plc (LON: VCT), Anexo Group Plc (LON: ANX), that have strong earnings potential.
Croda International Plc
FTSE 100-listed diversified chemicals company Croda International Plc (LON: CRDA), having a market capitalisation of over £9,000 million delivered a strong performance in the Life Sciences division in 2020. The company continues to upgrade its R&D and digital platform facilities, supported by healthy cash generation and a strong balance sheet. Croda witnessed a strong cash generation, with a free cash flow of £176.9 million.
During the second half of 2020, Croda was back to growth as it witnessed strong free cash generation. The board has proposed a full-year ordinary dividend per share of 91 pence, an increase of 1.1 per cent, well-supported by solid earnings, and a strong balance sheet in 2020. Croda has shown a decent business model and a healthy innovation pipeline that shall generate value for shareholders in the times to come. In the past 52-week period, Croda shares have rallied by over 54 per cent.
Henry Boot Plc
Construction & Materials company Henry Boot Plc (LON: BOOT), having a market capitalisation of over £372 million remains in a strong position with an agile recovery plan and a robust balance sheet. The company delivered a decent start to the financial year 2021 with better-than-expected forward sales along with a strong order book.
Despite a chopping 2020, the company managed to deliver a resilient performance in 2020. During the year, the company managed to reap a profit before tax of £17.1 million, which was ahead of expectations through apt land disposals. Due to confidence in its business operations and long-term growth, the company proposed a final dividend of 3.3 pence in 2020. In the past 52-week period, Henry Boot shares have rallied by over 13 per cent.
FTSE AIM 100 index-listed Restore Plc (LON: RST) has a market capitalisation of over £482 million. It is a support services company that specializes in document management services. The company delivered a resilient performance in 2020, with reducing debt levels and providing a foundation for substantial growth. The company has a strong balance sheet and seems to be well-positioned to reap benefits from market acquisition opportunities.
Despite the challenging trading conditions in 2020, the company achieved a resilient and profitable performance, supported by a strong bounce back during the second half of 2020. The company witnessed a strong cash generation with a reduction in net debt of £22.4 million during 2020.
In January and February, the company’s performance was in line with the Board's expectations, with trading remaining at 90 per cent of pre-COVID levels. Further, it is targeting organic growth across all business units by expanding market share, acquisition growth, and margin expansion with cost efficiencies driving from economies of scale.
Moreover, the acquisition of Computer Disposals Ltd shall generate revenue of nearly £8 million and EBIT of over £2 million per annum in the medium term. The increasing momentum of revenue recovery, strategic cost action and accretive acquisition indicate growth for the company in 2021 and beyond.
Speciality chemical company Victrex Plc (LON: VCT) has had a positive start to the first quarter of 2021, with an increase of 1 per cent year on year in Group revenue. Due to sound performance in Europe and the US, the Q1 performance was marginally ahead of the expectations. The company is bullish on Polymer based technologies as it believes that they have a key role to play in establishing long term growth opportunities. Victrex has a market capitalisation of over £1,999 million. In the past 52-week period, Victrex shares have rallied over 11 per cent.
Anexo Group Plc
FTSE AIM All-Share-listed company Anexo Group Plc (LON: ANX), having a market capitalisation of £157 million provides specialist integrated legal and credit hire services. Despite the Covid-19 pandemic, the revenue growth has surpassed the management's expectation.
The adjusted profit before tax for 2020 will be in line with current market anticipations. Further, the company is actively seeking to expand the operations into new markets to diversify the revenue streams without compromising the focus on high-value customers and prospects. ANX shares have delivered a price return of over 6 per cent since January so far.