2 secret growth stocks to watch this year

These two companies could be strong performers in 2018.

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2018

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While share prices may be exceptionally volatile at the present time, there continue to be buying opportunities for the long term. In fact, falling stock prices could present an opportunity to buy high quality companies at reduced prices. And while paper losses may be experienced in the near term, high returns could be on the cards over the coming years.

With that in mind, here are two shares which could offer surprisingly strong growth prospects over the medium term.

Improving performance

Releasing a brief update on Tuesday was global aviation services company Air Partner (LSE: AIR). It released an update on trading since its last release on 18 January. It confirmed that it is still expecting to deliver underlying pre-tax profit for the 2018 financial year that is not less than £6.4m. This suggests that the company has been able to meet expectations for the year and appears to be making progress with its strategy.

Clearly, the outlook for the global economy is becoming stronger. Although stock markets across the globe have fallen in recent days, this is largely due to the prospect of a higher interest rate rather than a slowing of the rate of world economic growth.

As such, Air Partner’s outlook appears to be positive, with the company expected to deliver a rise in its bottom line of 6% in the current financial year. This is due to be followed by further growth of 14% next year, which puts the company’s shares on a price-to-earnings growth (PEG) ratio of 1. This indicates that the company could offer growth at a reasonable price and may deliver a rising share price over the medium term.

Challenging period

Also operating in the aviation sector and reporting this week was Ryanair (LSE: RYA). The budget airline has experienced a challenging period, with pay disputes and cancelled flights causing disruption to passengers as well as negative PR. This situation could continue to some degree, with the company still negotiating with various unions. Therefore, it would be unsurprising for its shares to underperform some of its rivals in the near term.

In the long run though, Ryanair appears to offer significant investment potential. In the current financial year its bottom line is forecast to rise by 13%, while further growth of 6% is due next year. Following this, growth in earnings of 10% is expected in the year to March 2020. This puts the company’s shares on a PEG ratio of just 1.1. This suggests that while it has a risky outlook, the stock could also offer high return potential.

With Brexit set to happen next year, Ryanair could have an uncertain future due to heightened political risks. If there is no deal between the EU and UK then it could cause disruption to the European aviation sector. But with a wide margin of safety, this seems to have been priced-in by investors. Therefore, now could be the right time to buy the company for the long run.

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.

Peter Stephens has no position in any shares 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.

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