I think there are a couple of stocks growth investors should be looking at right now. These are companies that I see as having clear scope to increase their sales and profits for a long time. 

I’m a big believer in the idea that valuation is important – even when it comes to growth stocks. And these are shares that are trading at some of their lowest multiples for years.

Danaher

Danaher (NYSE:DHR) is a great example. The company is a collection of smaller businesses that supply tools and technologies in the life sciences and diagnostics industries.

The firm’s growth strategy involves acquiring other organisations that operate in markets close to its own. From there it looks to integrate them into its existing structure. 

This results in cost savings, operational efficiencies, and improved performance – which translates into higher profits. And this has been an extremely effective approach. 

Over the last 10 years, revenues have gone from $14.4bn to $23.9bn. While there has been some volatility during and after the Covid-19 pandemic, overall growth has been strong.

Acquiring other businesses is a risky approach. Danaher has recently paid a high multiple to acquire a company called ABCAM – and this increases the chances of overpaying. 

Eliminating this risk is impossible, but investors can mitigate it by avoiding overpaying for the stock. And at a price-to-book (P/B) ratio of just below 3 — its lowest level since 2019 — I think now is a good time to be looking.

Judges Scientific

Judges Scientific (LSE:JDG) has a lot in common with Danaher. It’s another firm that looks to grow by acquisitions and focuses on scientific equipment, albeit with a broader range of uses.

The stock has fallen 23% over the last 12 months, as sales have slowed. But I think this is temporary and puts the stock in very interesting territory. 

Unlike Danaher, Judges Scientific doesn’t typically look to involve itself in the businesses it acquires. It mostly allows them to continue to operate as they were. 

This increases the risk of overpaying, since cost savings aren’t there to be made. But there is a positive element to the company’s approach as well. 

Judges Scientific allows managers to keep running their operations. And this can be valuable for entrepreneurs who want to be able to continue to direct the businesses they have built.

The stock is trading at a P/B multiple of 6, which is high compared to other shares, but low in the context of where the stock has been in the last five years. As a result, I think it’s well worth taking a look at in March. 

Price-to-book!?

I’ve used price-to-book instead of price-to-earnings (P/E) as a valuation basis. This is because one-off and intangible costs make Danaher and Judges Scientific tricky in terms of earnings.

Both firms report adjusted metrics to account for this and I don’t object to using those in a valuation. On this basis, Danaher trades at a P/E multiple of 27 and Judges Scientific is at 29.

Book value, however, offers a relatively stable guide. And this is why the fact both stocks are trading at unusually low P/B ratios makes this a very good time to consider buying them.