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Two ‘monster’ growth stocks I’d buy NOW

Edward Sheldon, CFA
·3-min read
Chart displaying growth
Chart displaying growth

The London Stock Exchange is home to some really exciting growth stocks. Despite the stock market crash, some UK companies are growing at a phenomenal speed right now and delivering blockbuster returns for investors in the process.

Here, I’m going to highlight two hot UK growth stocks I’d buy now. In my view, these stocks have considerable growth potential.

Insiders are buying this growth stock

One hot stock I’d buy today is Boohoo (LSE: BOO). It’s a fast-growing online fashion retailer that owns a number of popular brands including Boohoo, BoohooMAN, PrettyLittleThing, and Nasty Gal.

I think Boohoo could deliver blockbuster growth in the years ahead. Not only should it benefit from the accelerated shift to online shopping, but it should also benefit from the work-from-home trend. Its low prices should also appeal to consumers in the current economic environment. Analysts expect sales growth of more than 30% this year, which is very impressive when you consider the state of the UK economy at present.

Boohoo’s share price has pulled back recently. One reason for the pullback is that the company’s auditor, PwC, has said that it plans to step down in the near future. Some investors see this as a red flag.

Personally, I’m not too concerned about the auditor issue. This is because top level insiders at Boohoo including the Chairman and CFO have been buying shares recently. This indicates that they’re confident about the future (and expect the stock to rise). So, I see the recent share price weakness as a buying opportunity.

Boohoo shares currently trade on a forward-looking P/E ratio of about 28 using the earnings forecast for the year ending 28 February 2022. I think that’s a steal. At that valuation, I see this monster growth stock as a strong buy.

A founder-led company with huge potential

Another exciting UK growth stock I’d buy right now is Alpha FX (LSE:AFX). It’s a fast-growing, founder-led financial services company that helps businesses manage currency (FX) risk. Its clients include the likes of ASOS, Holland & Barrett, and Halfords.

Alpha FX has grown at a phenomenal rate over the last three years. Between FY2016 and FY2019, revenue increased more than 300%. Looking ahead, the company looks set to continue growing rapidly. Analysts expect top-line growth of 18% this year and 19% next year.

A recent trading update showed that Alpha has plenty of momentum at the moment. The company said that trading in September had been “particularly strong” across all areas of the business and increased its expectations for full-year earnings. “I am looking forward to the rest of the year and beyond with optimism,” commented Morgan Tillbrook, founder and CEO.

Alpha FX has all the right ingredients to be a very profitable long-term investment, in my view. It has a strong track record of growth, is highly profitable (three-year average return on capital employed of 22%), and it has a strong balance sheet. It also has a passionate founder who is very driven. The stock’s P/E ratio is about 30 using next year’s earnings forecast, which isn’t excessive, I feel.

I’d buy this monster growth stock now.

The post Two ‘monster’ growth stocks I’d buy NOW appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Boohoo, Alpha FX and ASOS. The Motley Fool UK has recommended Alpha FX, ASOS, and boohoo group. 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.

Motley Fool UK 2020