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Should I buy or avoid these 2 growth stocks?

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In my experience, growth stocks can be fantastic ways to achieve massive gains over the long term. Having trawled through the indices, I’ve found two companies that look promising. Should I add these two businesses soon? Let’s take a closer look.

Tullow Oil

Tullow Oil’s (LSE:TLW) share price has fallen 19.68% in the last year, while it’s down 20% in the past month. The shares are currently trading at 44p.

The company – an oil exploration and production firm – recently concluded a deal to buy Capricorn Energy. The new partnership, which started in June, is designed to create a “leading African energy company”

Investment bank JP Morgan hailed the deal as a step in the right direction. It further believes that the partnership will be beneficial for both oil production and reserves. The bank placed a price target of 82p on Tullow Oil, which is far higher than the current share price.  

The present economic environment is also good news for the business, because both WTI and Brent Crude oil are still trading around $100 per barrel. This essentially means that Tullow Oil’s produce is worth more than it would have been in 2020, for example.

However, between 2020 and 2021, revenue fell by around $100m. This trend is something I’d like to see reverse when the next results are published.

AO World

Secondly, AO World (LSE:AO) shares have taken a battering over the past year. In that time, they’ve fallen 81.42%, while over the last month they’re down 40%. At the time of writing, the shares are trading at 45.5p.

The company – a retailer of electrical goods – announced last month that it was embarking on a £40m capital raise through the issuance of new shares. This sent alarm bells ringing in the stock market, because investors interpreted this as a sign that the firm was struggling for cash.

The business stated that it was raising cash to bolster liquidity and to be able to take advantage of any future opportunities to grow.

In terms of results, AO World performed relatively well during the pandemic. Between the 2020 and 2021 fiscal years, pre-tax profits grew from £600k to £20.2m. 

However, with more talk of a recession looming, it seems likely that revenue could be hit as customers have less cash in their pockets to spend on electrical goods. This could be bad news for the shares.

Overall, both of these companies have faced challenges recently. It’s still unclear how broader factors, like Tullow Oil’s takeover deal or AO World’s capital raise, will impact the respective businesses. Given the uncertainty, I won’t be adding these stocks to my portfolio, but I’ll keep them on my watchlist for the future.

The post Should I buy or avoid these 2 growth stocks? appeared first on The Motley Fool UK.

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Andrew Woods has no position in any of the shares mentioned. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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.