Every month, we ask our freelance writers to share their top ideas for growth stocks to buy with investors — here’s what they said for March!
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Experian
What it does: Experian is a credit bureau that provides scores to lenders. This allows them to assess borrowing risks.
By Stephen Wright. Experian (LSE:EXPN) has seen its share price rise by around 8% since the start of the year. As a result, the stock isn’t obviously cheap and this constitutes a risk.
For investors with a long-term outlook, though, I think this growth stock is worth considering. The company has a durable business, operates in an industry where barriers to entry are high, and has limited competition.
Demand for debt might be cyclical, but I don’t see it declining over the long term. As a result, I think banks will need to assess potential borrowers as accurately as possible for some time to come.
Experian’s big advantage is its database. The size of this makes it extremely valuable and virtually impossible for new competitors to emulate.
Equifax and TransUnion also offer similar products. But due to the cost of the product relative to the risk it offsets, lenders generally prefer to use all three, rather than one.
Stephen Wright does not own shares in Experian, Equifax, or TransUnion.
JD Sports Fashion
What it does: JD Sports Fashion is a UK high-street sports fashion retailer offering affordable clothes and sports equipment.
By Mark David Hartley. After a difficult year, JD Sports Fashion (LSE:JD.) shares are selling at a huge discount, down 37% since last February. At only 1.9%, profit margins are lower than last year and the 0.86% dividend yield adds little value. But I expect to see a resurgence in low-cost fashion this year. As recession-hit Britons tighten their belts, budget retailers like JD Sports will likely benefit.
At £1.13, analysts reckon JD Sports is undervalued by 63.8%, estimating £1.85 to be a more fair price. This is backed by the company’s return on capital employed (ROCE), which has increased from 13.9% to 19% over the past three years. Its financial position is also solid, with a debt-to-equity (D/E) ratio of only 4.6%. Earnings are expected to grow faster than the UK market, with return on equity (ROE) forecast to be 21.3% in three years.
Mark David Hartley does not own shares in JD Sports Fashion
Rolls-Royce
What it does: Rolls-Royce makes and services aerospace engines. In addition, it offers defence and power solutions across air, sea and land.
By Harshil Patel. Rolls-Royce (LSE:RR.) is undergoing a transformation that delivered record performance in 2023. Relatively new CEO Tufan Erginbilgic is doing a remarkable job in turning this business around.
For 2023, it reported sales of £16.5bn, up 22% from 2022 and record free cash flow of £1.29bn. Cost efficiencies and optimisation in the business could result in free cash of £1.7-£1.9bn this year according to the aerospace and defence manufacturer.
In addition, net debt fell, and return on capital more than doubled to 11.3%. This progress has made it a growing and resilient business, in my opinion.
Supply chain challenges could persist for a while, but so far the company has managed to meet targets.
Its share price has more than tripled over the past year, reflecting strong and steady progress throughout the period. But as it’s just the second year of a multi-year plan, I think this growth stock could still gain further.
Harshil Patel does not own shares in Rolls-Royce.
