What are the best growth stocks to buy today? I’ve been hunting through the market and have found two FTSE shares that look very promising to me.
To start my search, I narrowed down my focus to companies with rising sales and rising profits. I then looked for stocks that seemed reasonably valued and had recently issued positive updates. Here’s what I found.
Luxury winner
My first pick is luxury retailer Watches of Switzerland (LSE: WOSG), whose brand partnerships include Rolex, Cartier, Omega and Breitling.
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These high-priced timepieces generally command four or five-digit price tags. They’re also hard to get hold of. Demand has exceeded supply for some time. The company says that its client waiting lists grew longer during the six months to 30 October.
A shortage of supply makes it easier for luxury brands to maintain their exclusive appeal and push up their prices. Both of these things are happening here.
WOSG boss Brian Duffy said that “innovative new products, impactful marketing and elevated client service” are helping to attract new buyers.
At the same time, average selling prices are rising to reflect limited availability.
Sales up 31%!
Sales rose by 31% to £765m during the first half of its current financial year. This was helped by growing expansion into luxury jewellery and new shop openings in the UK, US and Europe.
Mr Duffy recognises that sales could be hit by “more challenging market conditions in the second half”. And with the stock priced for perfection, that could dent its appeal. But with the busy festive season ahead, I suspect the firm’s well-heeled customers will be happy to continue spending.
City analysts seem to share my view. They’re forecasting a 30% rise in annual earnings in 2022/23, followed by an 11% increase in 2023/24.
These forecasts price Watches of Switzerland shares on 19 times forecast earnings. Based on the company’s track record of growth and exclusive portfolio of luxury brands, I think the shares could still have further to grow.
4% yield plus growth
My second stock is completely different. FTSE 100 telecoms group Airtel Africa (LSE: AAF) operates mobile networks and banking services in 14 countries in Africa.
Since its London flotation in 2019, this business has delivered consistent growth and strong cash generation. The firm’s latest results show that customer numbers rose by almost 10% to 134.7m during the six months to 30 September.
Mobile money transactions handled by the group rose by 32% to $86bn, highlighting the growth potential of this business in Africa (where many people don’t have access to banks).
Broker forecasts suggest earnings will rise by 19% this year and by 13% in 2023/24. The stock also offers a forecast dividend yield of 4% that’s expected to rise to 5.7% next year.
I think the main risks with this business relate to its ownership. Indian group Bharti Airtel owns 56% of the stock and has debt linked to Airtel Africa. This means that the African firm isn’t entirely independent.
Airtel Africa could also suffer if political instability worsens in major markets such as Nigeria.
However, I think the shares are already priced to reflect these risks, on just eight times forecast earnings. In my view, there could be a good opportunity here, as part of a diversified portfolio.
