This top growth stock has now 10-bagged in just three years

This AIM-listed star’s share price just can’t stop rising. It’s not alone.

| 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.

For many investors, finding multi-bagging stocks is the aim of the game. One company that certainly ticks the box in this respect is law-focused finance and investment management firm Burford Capital (LSE: BUR).

Taking today’s action into account, the shares have climbed a smidgen under 1,000% since July 2015, underlining the potential for a single business to completely transform a portfolio’s performance and, in doing so, the wealth of those lucky enough to be invested in it.

Just the start?

This morning’s interim results were predictably excellent. Post-tax profit hit $166.3m for the six months to the end of June — up 17% from the $142.7m achieved over the same period in 2017. Income rose by the same percentage from $177.5m to $205.2m with 65% of this from realised gains. Cash generation soared 61% to $299m with the company’s total assets also climbing 37% in value to $1.64bn by the end of the period.  

While this kind of growth can’t continue indefinitely, I wouldn’t be surprised if Burford — thanks to its status as global leader in what can still be regarded as a niche market — replicated numbers like this for a while yet. Indeed, Chairman Sir Peter Middleton reflected that the company “continues to set the pace for a growing industry.” And CEO Christopher Bogart added that the commitment of more than half a billion dollars to new investments over the traditionally slow interim period fills management with “excitement” on Burford’s potential. While most definitely not a stock for income seekers, the 20% increase in the interim dividend to 3.67¢ only serves to emphasise this confidence.  

Clearly, these superb figures coupled with the great outlook means that buying a slice of Burford’s success is no longer cheap. On a forecast price-to-earnings (P/E) ratio of 26, the stock is now looking pretty dear compared to its industry peer group. With sky-high operating margins and increasing returns on the capital it invests, however, one might argue that that the quality on offer deserves such a valuation. 

Still rising

Burford isn’t the only stock that’s defying gravity. AIM-listed premier technology solutions provider Accesso Technology (LSE: ACSO) is another example of just how quickly a company’s value can shoot upwards. Three years ago, its share price was a little above the 500p mark. Today it stands at 2770p.

Like Burford, further gains seem likely. May’s pre-AGM trading update highlighted a “strong start” to 2018 thanks in part to an extension to an existing deal with global theme park operator Ceder Fair Entertainment.

Positively, Accesso — led by relatively new CEO Paul Noland — is not resting on its laurels. In addition to rubber-stamping a new contract with Detroit-based Henry Ford Health System (marking the company’s first foray into the healthcare industry), it’s also attempting to push its Ingresso ticketing distribution system in the US. Elsewhere, the company’s ShoWare solution continues to be popular, with the mid-cap overseeing ticketing for the opening ceremony of the Special Olympics USA Games earlier this month.

Again, all this comes at a price. Changing hands for a seriously steep 46 times projected earnings, Accesso’s stock is even more expensive than that of Burford. While I don’t doubt that growth will continue and its valuation will eventually surpass the £1bn mark, prospective investors may wish to consider waiting for a general market sell-off before joining the queue for its stock.

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.

Paul Summers has no position in any of the 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.

More on Investing Articles

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »

Investing Articles

2 FTSE dividend shares yielding more than 6% with P/Es of less than 9!

Harvey Jones picks out two brilliant FTSE 100 dividend shares that yield more than 6% but are selling at strangely…

Read more »

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »

Investing Articles

Down 78%, is this once-hot AI growth stock set to explode like the Rolls-Royce share price?

Our writer asks if he should invest in Super Micro Computer (NASDAQ:SMCI) following the growth stock's massive recent decline.

Read more »