As the UK economy opens up, I’ve been looking for growth stocks to add to my portfolio. While there are many such stocks on the market today, three firms stand out to me as being explosive growth opportunities.
All three of these firms are using technology to accelerate their growth, and I reckon they still have plenty of room to expand.
Explosive global growth
The first two companies on my list are Flutter Entertainment (LSE: FLTR) and Future (LSE: FUTR).
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Flutter operates one of the world’s largest gaming and gambling platforms. Meanwhile, Future publishes magazines and has leveraged its experience in technology to turn these into valuable online properties by selling products and gathering consumer data.
We only need to look at Flutter’s first-quarter trading update to see how the company is currently faring. During the three months to the end of March, average monthly players increased 36% globally. Total revenues jumped 33% year-on-year while online revenues jumped 42%.
The company’s US business is achieving by far the fastest growth. US revenues jumped 135% during the first quarter, and the group maintained its leading position in the market.
These numbers suggest to me that the firm’s growth last year wasn’t a one-off. It seems that consumers are still drawn to Flutter’s gaming platforms. That’s why I would buy the company for my portfolio of growth stocks.
Digital growth stocks
Future also reported robust growth in its latest trading update, published ahead of the group’s fiscal 2021 numbers. The firm said it expects “full-year profitability to be materially ahead of current market expectations.“
Management noted it’s also benefited from “robust digital advertising revenue and ongoing e-commerce product affiliate revenue growth.” These are the digital channels I mentioned earlier that have helped turn the group’s magazines into valuable assets.
Despite their recent growth, both companies face challenges. Flutter’s biggest one is the fact that the gambling industry is highly regulated. If regulators decide to move against the business, its profits could crumble overnight.
Meanwhile, Future relies heavily on digital advertising. Google and Amazon effectively control this market, and they have been criticised for a lack of transparency when it comes to tracing digital advertising spending. This could put some entities off from advertising with the business.
IT issues
As well as Flutter and Future, I’d also buy Homeserve (LSE: HSV) in my portfolio of explosive growth stocks.
The international home repairs and improvements business is benefitting as consumers shell out more to upgrade and maintain their homes. For the 12 months to the end of March, group revenues jumped 15%. North American revenues increased 22%.
Unfortunately, due to a bungled IT system switchover, the company’s profits slumped in the year. Management is now trying to rectify this issue while investing more in the group’s digital capabilities. The aim is to create a more diversified, efficient digital business and return to stable growth.
The biggest challenge facing the firm right now is getting this switchover right. If it can’t, additional losses could be on the horizon. Its growth may also take a hit.
Nevertheless, I’d buy the company for my portfolio of growth stocks right now, based on its potential. If management can get the IT issues sorted, I reckon Homeserve’s growth could take off.
