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2 cheap value stocks I’d buy today

Photo: Tomkasing. Cropped. Licence: http://creativecommons.org/licenses/by-sa/3.0/

Finding cheap stocks with bright futures is never easy. Ultimately, no stock is ever cheap without reason and this means that its risk profile may be higher than average. Similarly, identifying potential growth opportunities can be challenging, while uncertainty regarding the macroeconomic outlook is high. However, here are two companies which offer attractive share prices and significant growth potential. As such, they could be worth buying now for the long term.

A recovering bank

The last couple of years have been difficult for Standard Chartered (LSE: STAN). It has endured significant uncertainty regarding regulatory action, while its profitability has come under severe pressure. This has led to a share price fall of almost 50% in the last five years.

However, such a large decline means that it now offers relatively good value for money. The bank has a strategy which seems to be gradually placing it on a firmer footing for long-term growth, with a slimmed down management structure and a greater focus on compliance likely to lead to a lower risk profile over the medium term.

In fact, Standard Chartered’s comeback may already have begun. The bank is forecast to record a rise in its bottom line of 133% in the current year, followed by further growth of 53% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.2, which indicates that its shares could move higher.

Its profitability is also likely to be boosted by the continuing transition of China and the wider emerging world towards more consumer-focused economies. Demand for credit is likely to be high and due to its strong position within the Asian economy, Standard Chartered could be a beneficiary in the coming years.

A stronger resources stock

It’s not just Standard Chartered which has improved its financial strength in recent years. Resources company Glencore (LSE: GLEN) has suspended its dividend, cut costs and raised capital in order to boost its balance sheet strength. This has improved investor sentiment in the company and led to a rise in its share price of 300% in the last year.

Despite such a sharp rise, Glencore continues to trade on a relatively appealing valuation. For example, it has a PEG ratio of 0.1, since it’s forecast to record a rise in its earnings of 122% in the current year. Clearly, the company’s results are closely linked to the prices of commodities, but with a lower cost base and an improved outlook for the global economy, Glencore seems likely to deliver improved financial performance over the medium term.

Certainly, volatility can’t be ruled out and even seems likely. But investor sentiment could improve as dividends are set to rise, putting the company’s shares on a forward yield of 3.7% from a dividend which is set to be covered 1.7 times by profit. As such, now could be the right time to buy a slice of the firm for the long term.

Will either stock prove to be a major mistake?

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Peter Stephens owns shares of Standard Chartered. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.