2 dirt-cheap stocks you can’t afford to ignore

These two shares seem to offer a potent mix of value and growth.

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Finding shares with a mix of growth and value appeal is more challenging now than ever. After all, the FTSE 100 is close to a record high and the outlook for the UK and global economies is somewhat uncertain. However, there are still shares which offer high growth at relatively low prices. Here are two prime examples which could be worth buying right now.

Improving performance

Reporting on Tuesday was international designer, manufacturer and distributor of innovative flooring, Victoria (LSE: VCP). Its underlying profit before tax is ahead of expectations for the financial year to 1 April 2017. As a result, its share price moved over 4% higher on the day of the results.

Its performance has been stronger than expected due to operational synergies. This follows recent acquisitions in the UK and Australia, which have positively impacted gross profit margins and overheads during the current year. It expects more improvements in these areas in the coming financial year, with a new CEO set to implement a refreshed strategy.

With more acquisitions on the horizon and operational improvements anticipated, Victoria is expected to record a rise in its bottom line of 26% in the current year. Despite this rising bottom line, its shares continue to trade on a relatively low valuation. For example, they have a price-to-earnings growth (PEG) ratio of only 0.6, which indicates that now could be the perfect time to buy them.

Certainly, the outlook for the global economy is challenging. But with a wide margin of safety and sound fundamentals, Victoria seems to be a cheap stock which shouldn’t be ignored.

Strong recovery play

While industrial thread manufacturer Coats (LSE: COA) is expected to experience a rather challenging year, its long-term prospects remain bright. In the current financial year, the company’s earnings are due to fall by 29%, which could hurt investor sentiment. That’s especially the case since the company’s share price has more than doubled in the last year, which indicates that a degree of profit taking could be expected in the coming months.

Looking ahead to next year, Coats is forecast to return to positive growth. Its earnings are expected to rise by 10%, which indicates that its share price performance could improve. And since its shares trade on a PEG ratio of 1.1, it seems to offer a sufficiently wide margin of safety to merit investment at the present time.

With a dividend yield of 2%, Coats may not be an attractive income share right now. However, since shareholder payouts are covered four times by profit, there is scope for a rapid rise in dividends over the medium term. This could start as soon as next year, when the company is expected to record a dividend payout which is 17% higher than in the current year. Therefore, it may prove to be a strong income, value and growth play in 2018 and beyond.

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 assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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