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Highlights
- Growth stocks are an investment option that you may consider if you have a high-risk appetite and looking to grow your investment above the average return of the stock market.
- Growth stocks are the shares of companies that are expected to perform better than their peers in terms of earnings.
The stock market gives enough options to investors with different investment objectives, risk appetites, and time horizons. Growth stocks are a good investment option for those who have a high-risk appetite and looking to grow their investment above the average return of the stock market.
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Image description: Growth stocks are the shares of companies that are expected to outpace their peers in earnings and stock performance.
These stocks are the shares of companies that are expected to perform better than their peers in terms of earnings. These companies usually don’t pay dividends as the returns in terms of money can be sometimes huge.
The share value of growth-oriented companies tends to have a savvy leadership and a team focused on innovation with sizable market opportunities. The company can be volatile since investors are constantly assessing their performance relative to high expectations.
To identify growth stocks, you may look at the Return-on-Equity (ROE) and Price-to-Earnings (P/E) ratios. The ROE is calculated by dividing the net income of the company by its shareholders’ equity and shows how efficiently shareholders’ money is utilised to generate profit. A company with a higher ROE as compared to its peers indicates that it has used capital more efficiently to generate profits.
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Whereas the P/E ratio is used to gauge the value of the company’s stocks and is calculated by dividing the market value per share by earnings per share. A higher P/E ratio indicates a growth potential as it shows a higher return on total investment made by the company.
Related Read: HMI, PXEN, TAVI, PIP: Lens on penny stocks offering returns of over 100%
Here are the 3 UK growth stocks with high ROE and P/E ratios.
- Rightmove Plc (LON: RMV)
The current market cap of the UK’s largest online real estate portal and property website stands at £4,812.75 million as of 8 June 2022. Rightmove Plc’s shares closed at GBX 573.60 on 7 June. Its share value has depreciated by -7.33% in the last one year, as of 8 June 2022. Its ROE was 196.01%, whereas its P/E ratio was 27.90x.
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- Imperial Brands Plc (LON: IMB)
The current market cap of the UK-based tobacco group stands at £17,172.57 million as of 8 June 2022. Imperial Brands Plc’s shares closed trading at GBX 1,814.50 on 7 June. Its share value has appreciated by 12.49% over the last one year, as of 8 June 2022. Its ROE was 46.47%, whereas its P/E ratio was 8.48x.
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- Relx Plc (LON: REL)
The current market cap of the multinational information and analytics company stands at £42,788.02 million as of 8 June 2022. Relx Plc’s shares closed trading at GBX 2,223.00 on 7 June 2022. Its share value has appreciated by 20.75% over the last one year, as of 7 June 2022. Its ROE was 65.95%, whereas its P/E ratio was 29.57x.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.