Finding shares with upbeat growth prospects and low valuations can be challenging. At a time when the FTSE 100 is trading close to a record high, it is perhaps more difficult than ever. However, there are still stocks that could be worthy of investment for the long run. With that in mind, here are two shares that appear to offer a potent mix of high growth prospects and low valuations.
Perfect timing
Reporting on Tuesday was wealth manager St. James’s Place (LSE: STJ). It has enjoyed a highly prosperous first quarter of the calendar year, with rising stock markets helping to boost its overall performance. Gross inflow of funds increased by 32% during the quarter. This was supported by a high retention of clients and their investments, which resulted in net inflows of almost £2bn for the quarter. This took total funds under management to just under £80bn.
Looking ahead, the company faces an uncertain future. Political risk in Europe remains high, which could mean that the recent share price rally comes under a degree of pressure. Despite this, St. James’s Place has a strong business model which should generate impressive returns due to the continued personal finance challenges people face. For example, rising inflation could lead to greater demand for the company’s services.
St. James’s Place is forecast to record a rise in its bottom line of 95% in the current year, followed by further growth of 21% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of just one, which indicates that it offers high growth at a reasonable price. While there is scope for disappointment over share price returns in the near term, in the long run the company appears set to deliver a rapidly-rising share price.
Consistent growth
Also offering upside potential is multi-channel customer service and secure payments solutions provider Eckoh (LSE: ECK). Its track record of growth has been somewhat disappointing, with it making a pre-tax loss in two of the last four years. However, it is currently forecast to offer a relatively consistent and robust growth outlook, which could make now the right time to buy it.
In the current year, Eckoh is expected to deliver a rise in its bottom line of 20%, followed by further growth of 22% next year. With a price-to-earnings (P/E) ratio of 29, this means that it has a PEG ratio of just 1.4. This suggests that its share price could mount a recovery following its 17% decline during the course of the last year.
The company continues to make progress with new contracts and has enjoyed notable success in the US. This means that its US division could surpass the operations it has in the UK in a relatively short space of time. As well as delivering strong profit growth, this could help to diversify the company’s operations and lead to a lower risk profile in the long run.
