2 growth stocks that could beat the market over the next 3 years – Motley Fool UK

Is there an opportunity to buy beaten-down growth stocks? Our writer considers two founder-led shares that could potentially beat the market.
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Many shares face significant challenges over the coming year or so. Costs are rising for both businesses and consumers, and a recession now looks likely. That said, there are several growth stocks that have excellent prospects for the next few years.
For instance, British games maker Frontier Developments (LSE:FDEV) expects sales to grow by 20% per year on average. And it’s by no means a wild forecast. It recently reported record revenue of £114m. That’s 26% higher than the previous year.
So what does Frontier do and could this growth stock beat the market? Let’s take a further look.
For almost 30 years, Frontier has been developing innovative games. At the helm is David Braben, CEO and founder of the business.
Some of the best companies in the world are founder-led, and with Frontier, Braben owns almost a third of the shares. That’s exactly the kind of skin-in-the-game that I like to see.
Its internally-developed games are driving material sales for the business. And several upcoming releases should build on that growth.
In addition to self-publishing games, Frontier partners with selected studios under its new games label Frontier Foundry. This part of the business looks promising and could drive future growth over the coming years.
There are risks if Frontier isn’t able to find and retain the talent that it needs to grow. Skilled staffing is a key component of the business model.
Sales for the coming years could also be hit by the rising cost of living. I’d question if consumers will be willing to spend more on games if they have less disposable income in their pockets.
Overall, Frontier has a healthy balance sheet, a solid strategy and innovative ideas. With a share price sitting 40% lower than this time last year, I reckon it has a decent chance to beat the market over the next three years.
Often the best growth stocks already have a successful track record. One such share is data and analytics company YouGov (LSE:YOU). Sales have doubled since five years ago and profits are up six-fold.
Its share price has fallen by 22% over the past year. But let me take a step back. If I’d bought these shares a decade ago, I would have achieved an annual return of 30%.
Could the recent share price tumble be an opportunity to beat the market? I reckon so.
It’s often said that data is the new oil. Companies that can successfully provide insights from mountains of data points could be the biggest winners of the future.
YouGov aims to do just that. Its unique panel of 17m members can capture thousands of data points on consumer attitudes and behaviour.
That being said, competition looks like the largest risk. It will need to keep up with emerging technologies that could provide superior data analytics in the future.
With technology-based businesses, competition from much larger players can often appear quickly and can have a material impact on future earnings.
All things considered, I would describe YouGov as a high-quality growth stock. I reckon the recent dip in share price is an opportunity and I wouldn’t hesitate to buy the shares today.
Harshil Patel has positions in YouGov. The Motley Fool UK has recommended Frontier Developments. 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.
Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.
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