Today I’m going to look at two growth stocks in my personal portfolio that have delivered gains of at least 90% over the last year. Shareholders may be tempted to take profits, but I’m going to explain why I think further gains are possible at both firms.
This is the future
Internet marketing group Taptica International (LSE: TAP) said this morning that the company’s full-year results are expected to be “higher than market expectations” thanks to continued expansion and an increase in ad spending by existing customers.
Shares of AIM-listed Taptica have risen by 113% so far in 2017 and by a staggering 428% over the last year. This Israel-based company was founded in 2007 and floated in 2014. It specialises in providing targeting mobile advertising services for corporate customers such as Sony and Starbucks.
Management said today that corporate clients and advertising agencies are increasing the amount they spend on mobile advertising with the firm. Expansion into the Asia-Pacific region is also progressing well. The company says that revenue for the six months to 30 June should be 25% above the same period last year, while earnings before interest, tax, depreciation and amortisation (EBITDA) should be 40% higher.
Despite this meteoric growth, the firm’s shares still look relatively affordable. One reason for this is probably that some investors are wary about investing in overseas AIM stocks. These have gained a bad reputation over the last couple of years, but Taptica’s accounts look sound to me and I’m confident the group’s cash generation and profits are real.
Today’s update is likely to trigger a round of broker upgrades for the stock, which trades on a 2017 forecast P/E of about 13. Although the dividend yield is low, at 1.5%, the firm ended last year with net cash of $21.5m. It could offer bigger payouts if it wasn’t reserving cash for acquisitions. I plan to continue holding.
Shareholders could get a cash bonus
Redrow (LSE: RDW) is my pick of the housebuilders and is a stock I own myself. Although it’s not the largest in the sector, I feel it offers more upside from current levels than some rivals.
The group is controlled by chairman and founder Steve Morgan, who has a 29% stake in the business. Mr Morgan has overseen a strong recovery since 2009, when he returned after a period away from the firm. However, the investment needed in the business since then has meant that it has lagged key rivals in terms of free cash flow and dividend growth.
This has resulted in the company trading at a lower valuation than some peers. The stock currently has a forecast P/E of eight and a prospective dividend yield of just 2.8%, well below the average among big-cap housebuilders.
However, I believe the outlook is starting to change. I estimate that free cash flow rose by 135% last year. This helped the firm to cut net debt from £183m to £56m in 2016.
If the company can continue to generate surplus cash at this rate, I believe shareholders could be in line for a big dividend hike, potentially driving the shares higher.