The top 10 European growth stocks to soften sceptics

European stock markets have been on a tear since the turn of 2015. With central bank bond-buying under way and a strengthening dollar putting pressure on US companies, European shares have become la coqueluche du moment. But with apparently rich pickings for investors prepared to look beyond their home borders, where do you start looking for opportunities?

One answer could lie in some of the patterns we’re seeing in our European screening strategies this year. With the FTSEurofirst 300 index up by a blistering 18% over the past 12 months, it’s the Growth strategies have generally got closest to matching those gains performance.

Together they’ve generated an aggregate return of 13.8% - but there have been some standout performances. Among them are Charles Kirkpatrick Growth, up 25.7%, Growth at a Reasonable Price (GARP), up 24%, and the Robbie Burns-inspired Naked Trader screen, up 19.3%. As this chart shows, the GARP screen has delivered some strong returns in Europe since we began tracking it two years ago - and the chart has broken out again in May.

Chasing European growth shares

Another way of studying growth in Europe is to consider the GrowthRank. This is Stockopedia’s scoring and ranking system for companies based largely on their historic and forecast sales and earnings growth (you can read more about it here).

In a little under two years, a quarterly rebalanced portfolio of £100m+ European stocks with a GrowthRank of more than 80 out of 100 has produced a 38.5% return. That’s not a bad performance. But it does fall short of the same basket equivalent of top ranking StockRank shares, which returned 51% over the same period. While the StockRanks do of course, focus on quality, value and momentum and exclude the Growth Rank, Ed has shown that the top QVM stocks have extremely high growth rates.

With all this in mind we set up a screen to look for the very highest GrowthRank shares in Europe to pick out those with the best historic and forecast growth rates. For added detail, we sorted that list for those with the highest StockRanks. Subscribers can see the screen here.

Name	Mkt Cap £m	Growth Rank	Stock Rank™	Industry Grp	Flag
Almirall SA	2,295	99	99	Pharmaceuticals
Ubisoft Entertainment SA	1,257	99	96	Leisure Products
Moulinvest SA	14.5	99	92	Paper & Forest Products
Dialog Semiconductor	2,798	99	89	Semiconductors & Semiconductor Equipment
Hexpol AB	2,421	99	84	Chemicals
Prodware SA	35.3	99	82	Software & IT Services
Novo Nordisk A/S	94,926	99	82	Pharmaceuticals
Moncler SpA	3,132	99	78	Textiles & Apparel
NetEnt publ AB	1,037	99	78	Software & IT Services
Ams AG	2,561	99	78	Semiconductors & Semiconductor Equipment

The top European Growth stocks

In top position is Spanish pharmaceuticals group Almirall, which manages a 99 in both its GrowthRank and StockRank scores. One year ago its StockRank was lagging at just 42. However, a recovery has unfolded and at E18.6, Almirall’s share price is now at an all time high. It qualifies for seven guru strategies, including the GARP screen.

Almirall is followed by French games software developer Ubisoft. This is a company that first registered on our European screens back in mid-2013 when it was beating earnings forecasts. That momentum has remained intact and Ubisoft’s shares have since risen by 64% to E16.47.

Moulinvest, a French company that specialises in wood cutting and manufacturing services, is another high GrowthRank stock that also has a top decile StockRank. Interestingly, this company appears to be trying, with some success, to move away from some pretty lacklustre performances in previous years. It’s now got three years of sales and earnings growth, which are both forecast to continue.

The sole German stock here is Dialog Semiconductor. A look at its five year price chart tells the story of an exceptional performance over the past 18 months. No surprise that the racy price has damaged the company’s valuation appeal, but it achieves top ranking scores in quality and momentum. Earnings have been growing at pace in recent years and are forecast to grow by 30% in 2015.

Finally, the largest stock on the list by some distance is the £95bn Danish healthcare giant Novo Nordisk. Despite its size, this group has consistently grown earnings in recent years. Like Dialog Semiconductor, Novo Nordisk has seen its share price rise strongly in 2015 and it looks expensive on several measures. But that contributes to its profile as a classic Bill O’Neill CAN-SLIM growth stock, with strong earnings growth and excellent return on equity allied with persistent price momentum.

Growth set to continue?

Given the positive effects that quantitative easing had on shares in the United States and, to a lesser extent the UK, it’s no surprise to see European stock markets racing away in 2015. So far, growth strategies have been some of the biggest beneficiaries of these conditions. But it’s likely that momentum and quality strategies will also perform well. With that in mind, using the GrowthRank can be a useful pointer to fast growing shares, but the addition of the StockRank will ensure that the quality, value and momentum bases are covered, too.

You can read more about the construction of the StockRanks here. In addition, you can click here to find out more about Stockopedia and see our Subscription Plans to take a two-week free trial.