Buying these 2 growth stocks today could help you retire with a million

With market-beating returns on offer, these two small-caps could really boost your portfolio’s returns.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The last time I covered Avation (LSE: AVAP), I concluded that if the company can continue to produce investor returns as it has done in the past, the shares could double investors’ money every four years. It looks as if this remains the case. Shares in the aircraft leasing business have marched higher over the past two months, hitting a high of 242p in January, although they’ve recently been brought back down to earth by market turbulence. 

Still, according to the company’s interim figures, which were published this morning, it looks as if Avation still has plenty of airspace to fly higher. 

Restructuring the portfolio 

According to today’s numbers, for the six months to the end of December, revenue increased 16% year-on-year as the value of the firm’s aircraft fleet rose 35% to just over $1bn. Unfortunately, earnings per share for the period declined 15% year-on-year, which management attributes to the sale of six ATR 72 aircraft in June 2017. These sales reportedly helped de-risk the portfolio by “lowering airline concentration” and unlocking funds for reinvestment into new planes.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Management’s actions to reposition the portfolio throughout the year mean that the average weighted age of the fleet has now decreased to 2.9 years (from 3.3 years) and the weighted average remaining lease term has increased to 7.9 years (from 7.5 years). The firm expects lease revenue to increase substantially in the second half thanks to these changes. So it seems that all in all, even though the sales of aircraft have dented profitability, the company is well positioned to continue to grow and reinvest in the years ahead. 

As I mentioned before, Avation’s main method of value creation is via book value growth. Over the past five years, the company’s book value per share has expanded at a rate of 16% per annum. Growth slowed to just 4% in the period under review, although book value now stands at $3.32 per share or 237p, so today the shares are trading just below book.

City analysts are expecting earnings per share for the year to 30 June to fall by 21% before rebounding 23% to 25p next year. On this basis, the shares are trading at a forward P/E of 9. 

Cash cow 

Another investment that I believe can continue to produce returns for investors year after year is Amino Technologies (LSE: AMO). It produces technology for the pay-TV market, including set-top boxes, a highly lucrative business. Indeed, over the past five years, net profit has surged from £2.8m to £11.1m for fiscal 2017. 

Management has returned the vast majority of this income to investors. The board has hiked Amino’s dividend per share by an average of 17.3% per annum over the past five years, leaving the shares yielding 3.7% today. This might not seem like much, but over the next five years, assuming the payout continues to expand at a rate of 10%, by 2023 the stock will yield just under 6%. 

I have every confidence that the firm can keep up this rate of dividend growth. For the year to 30 November 2017, the distribution was covered 2.2 times by earnings per share and Amino’s balance sheet is stuffed full of cash with a cash balance per share of 13p reported at the end of fiscal 2017. On a valuation basis, the shares trade at a relatively modest forward P/E of 13.2 or 12.5 on a cash-adjusted basis. 

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Just released: our 3 top small-cap stocks to consider buying in April [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

Here’s why Tesla stock just rocketed 22.7%! Is it time to buy?

This writer wonders whether the news that sent Tesla stock soaring yesterday is a true gamechanger for the electric vehicle…

Read more »

Investing Articles

2 quality UK stocks to consider buying as share prices rally

With UK stocks moving higher, it might look as though investors with cash on hand have missed their chance. But…

Read more »

Investing Articles

How much £10,000 invested in Lloyds shares is forecast to be worth in 12 months

Harvey Jones is looking past today's stock market volatility to see where Lloyds shares may stand in a year's time.…

Read more »

Investing Articles

How Warren Buffett stays ahead of the stock market

When share prices fall, everyone suddenly wants to be like Warren Buffett. But what’s the secret to the Berkshire Hathaway…

Read more »

Investing Articles

Cheap UK dividend shares to consider buying right now

We're only just past the first quarter of 2025, but it already looks like the year could be another good…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

What the heck is going on with the Barclays share price now?

The Barclays share price surged 25% as the market open on 10 April. Once again, the volatility’s been driven by…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

What the devil’s going on with the HSBC share price?

The HSBC share price has actually been less volatile than some of its peers, despite its Chinese operations suggesting it’s…

Read more »