Two high-growth stocks you might regret not buying

Over the past decade, RPC (LSE: RPC) has proven itself to be one of the market’s top growth champions. Indeed, if you’d invested in the business 10 years ago with £1,000, today that would be worth £4,431 today, including dividends. 

The plastic packaging maker has been able to achieve such impressive returns for investors as the business is highly profitable and cash generative. Management has been able to successfully reinvest that cash in acquisitions to help improve growth further. The largest of these deals was the recent $640m acquisition of US-based plastic food packaging manufacturer Letica Group, announced in February, which was at the time the sixth deal in five months. 

Growth through acquisitions 

These deals have paid off handsomely. Today, the group announced that during the six months to the end of September, revenue grew 53% year-on-year to £1.9bn, reflecting the contribution from acquisitions, and adjusted EBITDA rose 49%. Free cash flow was up 45% to £172m, from £118m the year before, giving management room to hike the interim payout by 28%. 

After a busy start to the year, RPC is now focused on optimising its cost structure, paying down debt and integrating existing acquisitions. According to management, there will be no further deals this year. 

Still, RPC does not need to buy to grow. Healthy cash generation gives the group plenty of scope to reinvest in the business and grow organically (management is also using cash to buy back stock). 

City analysts have pencilled in earnings per share growth of 11% for the fiscal year ending 31 March 2018, implying that the shares are trading at an estimated forward P/E of 13.4. I believe that this lowly valuation undervalues RPC and the group’s prospects considering the firm’s historical growth rate. The shares also support a dividend yield of 2.9%, and RPC has a 26-year record of increasing its payout to investors. 

Doubling profits 

Another growth stock I believe you might regret not buying is Quixant (LSE: QXT). 

Quixant is an exciting business. The firm manufactures specialist computer systems, which is proving to be highly lucrative. Earnings per share jumped 44% last year, and are on track to grow 36% this year, thanks to rising demand. 

In fact looking at the firm’s first-half results, I believe that the City’s estimate for growth of 36% for 2017 might be conservative. For the six months to 30 June, group revenue rose 38%, while EBITDA and pre-tax profit lept 74% and 98%, respectively. Management has cautioned that these strong growth numbers might not be repeated in the second half as H1 demand was “out of the ordinary” and such buoyant trading is unlikely to be repeated. Still, these numbers put the group in a great position to be able to hit full-year targets. 

The one downside with Quixant is that the shares are quite expensive. At the time of writing the stock is trading at a forward P/E of 29.9, although when you factor in the projected earnings growth for this year, the shares seem cheap, trading at a PEG ratio of 0.8.