I’ve been hunting for high-potential growth stocks on the FTSE as valuations sink this year.
Economic forecasts aren’t great right now, and the current environment isn’t particularly conducive to growth, but I’m confident we’ll see a bull market when sentiment starts to change.
Don’t forget, after the 2008 financial crisis, UK shares exploded upward. The bull run generated considerable wealth.
So, here are two UK stocks that I think have huge potential.
Darktrace (LSE:DARK) is a British cyber-security firm which uses AI to prevent attacks in real time.
The company’s most recent business updates have been positive. In April, Darktrace increased its annual revenue guidance after adding 359 net new customers in the third quarter. It said it had added $105.3m annual recurring revenue (ARR) in the nine months until the end of March.
This was followed by a positive broker appraisal.
Jefferies, referring to the group’s “positive” third-quarter trading statement, set a 730p target for the stock, more than double the current share price.
The security environment is also conducive to Darktrace’s growth. US President Joe Biden encouraged firms to enhance their protection earlier this year amid increasing geopolitical competition.
But Darktrace’s name has been somewhat muddied in 2022. In May it was announced that a Darktrace executive had been named in a judgement concerning malpractice in the sale of Autonomy to Hewlett Packard in 2011.
A judge contended that Autonomy’s management had pulled accounting “levers” to misrepresent the Cambridge-based business’s performance ahead of its sale.
Yet aside from that, I think this is a cyber-security firm with considerable potential. The stock has a price-to-sales ratio of eight, which is considerably less than its competitors, including CrowdStrike at 24.5.
I bought Darktrace shares in May, and would buy more at the current price.
Ocado (LSE:OCDO) shares now trade below their pre-pandemic price. The grocery delivery and technology firm was one of the few winners during the pandemic. Its stock soared when lockdowns started. But the shares have since slumped.
Regardless, I see plenty of value in Ocado. The company uses advanced robotics in its warehouses to enhance efficiency, and this could prove vital amid the current inflationary pressures we’re seeing.
The firm is also licensing its robotics infrastructure to other grocers. As of November 2021, Ocado had 10 licensed sites generating a total of £777m in sales. That’s around 31% of its revenue. And it’s continuing to invest in its robotics division with the $10m buyout of US robotics start-up Myrmex.
Growth, according to some metrics, has continued beyond the pandemic. In March, the company said it had 835,000 active customers, far above pre-pandemic levels.
However, Ocado reported a 6.4% decline in sales over the last quarter, with overall online sales down 12% in June as shoppers cut their spending.
However, my positivity is driven by long-term trends to push grocery shopping online, and the business’s underlying data. The robotics arm generates an EBITDA margin of 10%, while its retail arm should grow in the long term.
I haven’t bought Ocado shares yet, but I’d buy and hold them for at least five years.
The post 2 FTSE growth stocks to buy before the next bull run! appeared first on The Motley Fool UK.
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James Fox owns shares in Darktrace. The Motley Fool UK has recommended CrowdStrike Holdings, Inc. and Ocado Group. 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.