Ricardo is a collection of consultancy businesses, which offer advice to the engineering, technical and environmental sectors. The company has reported steady growth over the past six years, with net profit growing at a compound annual rate of 2.3%. This rate isn’t particularly attractive, but what I’m interested in is the group’s future potential.

Booming market

According to its fiscal 2019 results, statutory earnings per share grew by 12% last year on the back of revenue growth of 2%. Further, the group’s order book expanded by 6% on a reported basis to £314m.

With the world becoming more and more concerned about the environment and the impact climate change might have on our day-to-day lives, I see a bright future ahead for Ricardo.

Demand for environmental consulting services is only going to increase going forward, and the company is well placed to capitalise on this growth. Indeed, commenting on today’s results, CEO Dave Shemmans said: “We continue to invest in technologies, services and digital products to aid our blue-chip clients — together we create sustainable solutions to address the key issues of climate change, air quality, global stability and the management of scarce natural resources.“

Double your money

So the market is there, Ricardo just needs to execute. Based on its track record, I believe it can. However, the market seems wary.

At the time of writing the stock is trading at forward P/E of just 11.5, even though City analysts are expecting double-digit earnings growth next year. I think this could be an excellent opportunity for growth investors to buy into a business with a bright future at a discount price.

On top of this, the shares support a dividend yield of 3%. If earnings continue to grow at around 10% per annum, even without any multiple expansion, I think this stock could double in value over the next two years.

Income champion

Another growth stock that I am eyeing up at the moment is Arrow Global (LSE: ARW). Arrow buys, services and collects non-performing loans. Put simply, it is a debt collector. Financial institutions and companies sell the business portfolios of unsecured and defaulted loans, and Arrow tries to make a profit by recovering the debts.

Ethical considerations aside, business is booming for the company. Over the past six years, net profit has grown at a compound annual rate of around 15%. City analysts expect the business to earn 36.8p per share this year, putting the stock on a forward P/E of just 5.8. Earnings growth of 17% is expected for 2020.

Arrow returns most of the cash it generated from operations to shareholders. Last year the company distributed 12.7p per share in dividends and this year analysts are forecasting a distribution of 13.2p. At the current share price, that gives an estimated dividend yield of 6.2%.

Based on all the above, I think shares in Arrow could be worth between 300p and 400p. This implies a total return of more than 100% over the next few years, including dividends.

The post £1,000 to invest? I think these two growth stocks could double appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Over the past 12 months, shares in SSP Group (LSE: SSPG) have risen 62% excluding dividends, outperforming the FTSE 100 by around 51%. And after this performance, the shares look as if they can head higher as the company continues to expand its offering across Europe.

Captive audience 

SSP, which owns and maintains food and beverage outlets in stations and airports around Europe, announced its results for its fiscal third quarter today, declaring that revenue for the three months to the end of June rose 15% year-on-year at constant currency. Sales growth was primarily driven by new store openings as like-for-like sales growth came in at 3.6%. At actual exchange rates, the company benefitted significantly from the weaker pound, which led to a 22% year-on-year rise in revenue. For the first nine months of the financial year, the company saw revenue rise 10% at constant currency.

Commenting on today’s numbers management said: “Looking forward, whilst a degree of uncertainty always exists around passenger numbers in the short term, particularly in the current environment, we are well placed to continue to benefit from the structural growth opportunities in our markets and to create further shareholder value.” 

Even though SSP may fall under the radar of most investors, creating value is what the group does best. Over the past five years shares in the company have outperformed the FTSE 100 by more than 110% excluding dividends. And for the financial year ending 30 September 2017, City analysts expect earnings per share growth of 19%. Growth of 9% is expected for the next fiscal year.

Unfortunately, as shares in SSP have exploded higher over the past 12 months they currently trade at a relatively demanding multiple of 26.2 times forward earnings, falling to 24.1 times earnings for fiscal 2018. Even though this multiple might seem expensive, the company is well placed to continue growing. It has a captive customer base in stations and airports, and the company can use this to its advantage as the rest of the retail industry struggles. Growth in air passenger numbers, as well as price rises, should continue to offer opportunities.

Dirt cheap growth 

Debt servicing company Arrow Global (LSE: ARW) has also seen its shares rally higher over the past 12 months. Arrow has added 95% since July last year, and it looks as if the shares could double again based on current growth forecasts. The City is expecting Arrow to report earnings per share growth of 28% for 2017 and 25% for 2018. 

Despite these lofty projections, the shares are only trading at a forward P/E of 12.2, falling to 9.6 for 2018. Put simply, if you’re looking for a dirt cheap growth stock that is expected to grow rapidly in the years ahead, Arrow looks to be a great option. According to my figures, based on the estimates above, shares in the company are trading at a PEG ratio of 0.4. A PEG ratio of less than one implies that the shares offer growth at a reasonable price. 

The post 2 fast-rising growth stocks worth a second look appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of SSP 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.