3 top growth stocks for 2014 and beyond

These companies offer both acquisitive and organic growth coupled with rising dividends, what's not to like?

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Although many analysts are pointing to ASX6000 in 2014, there are some who believe the market is fully valued. That doesn't mean we have to go to speculative lengths to find modestly valued companies with exciting prospects, there are a number of established companies on offer which I believe hold long-term value.

The first of which is law firm Slater & Gordon Limited (ASX: SGH). Although the stock has climbed nearly 110% in the past 12 months, the market is yet to realise the company's long-term growth potential. The company has been busy expanding its presence in the UK and in the current financial year has made no less than three acquisitions. Recently the company was admitted into the S&P/ASX200 (ASX: XJO) (^AXJO), paving the way for further investment from institutional investors.

The company has a manageable debt load, strong net profit margin of 14.1%, net operating margin of 24.5%, return on equity of 12% and five-year annual earnings growth rate of 11.3%. Its dividend of 6.6 cents per share will likely increase in 2014. A large UK market provides opportunities for the firm to continue growing in the medium term. Trading on a price-earnings of 17, the stock represents fair value but looks quite cheap given its longer-term potential.

Greencross Limited (ASX: GXL) is another small company which is seeking to grow acquisitively. It has a huge untapped market here in Australia that it is looking to consolidate with its diversified veterinary services. Although its gearing is currently around 55%, it will likely increase to 65% (as it funds more acquisitions), before returning to the long-term target of less than 50%.

Like Slater & Gordon, it has also notched up impressive gains in the past year and if investors want a slice of the company they will have to be prepared to pay up to 50 times earnings. In my opinion, given the lack of consolidation in the veterinary market, Greencross is deserving of the price tag. However, investors should keep a watchful eye on the company's return on equity (and purchase price of acquisitions) and payout ratio. It's important management aren't merely pursuing growth for growth's sake and returning too much in dividends to shareholders while also pursuing acquisitions.

Lastly, Collins Foods Ltd (ASX: CKF) represents the best value of the three stocks. It is the operator and franchisor of KFC and Sizzler stores in Australia and Asia. In addition to organic growth, it too is undertaking an aggressive growth strategy. It recently acquired 44 KFC restaurants in Western Australia and the Northern Territory for $55.6 million. The acquisitions will be immediately earnings-per-share accretive. In addition it has recently invested $1.85 million for a 50% equity stake in Snag Stand – an attractive early-stage company in the rapidly growing fast-casual dining sector.

It pays a rock solid 4.8% dividend and has a manageable debt load. It currently trades on 11 times earnings, but this is highly likely to moderately increase over the next two years following more acquisitions, store openings and a successful advertising campaign by KFC. Given its current growth prospects, balance sheets, brand recognition and dividend, its one investment not to be missed.

Foolish takeaway

Investing in smaller companies can be extremely lucrative but investors must be prepared for more volatility and be in it for the long term. These companies can take years to blossom but a sustainable dividend will keep you comfortable while you wait. In my opinion all these companies could easily be added to investors' portfolios but, at current prices, Collins Foods represents the best value for 2014 and beyond – although Slater & Gordon's UK growth is promising.

Motley Fool contributor Owen Raszkiewicz owns shares in Collins Foods. 

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