2 excellently valued stocks for growth and income hunters

Royston Wild discusses two stocks with perky profits prospects.

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Randall & Quilter (LSE: RQIH) stepped to two-month peaks in Monday trading after a positive-if-unspectacular reception to half-year numbers. It was last dealing 1% higher from the end of last week.

The specialist non-life legacy insurance investor advised that pre-tax profit galloped to £5.4m in January-June from £1.2m in the same 2016 period, with a £19.1m contribution from legacy transactions proving critical in driving the bottom line.

Celebrating the results, chairman and chief executive Ken Randall said: “I am pleased to report that the Group delivered a very strong performance during the first half of the year. It is the Board’s view, especially given the advanced state of a number of other legacy transactions and the growing pipeline that the results for the full year will be at least in line with expectations, absent unforeseen circumstances. ”

And Randall added that “the outlook for the Group beyond the current year remains very promising.” The firm’s head specifically pointed out that its ongoing programme to simplify the business, following the recent disposals of its Lloyd’s Managing Agency and Triton divisions, still has some way to go.

A great all-rounder

Current City forecasts certainly suggest that Randall & Quilter is worth checking out right now. The company is expected to record a 61% earnings increase in 2017, resulting in a forward P/E ratio of 7.8 times, which falls under the broadly-considered bargain watermark of 10 times.

Furthermore, a corresponding sub-1 PEG readout, at 0.1, underlines the investment giant’s brilliant value in relation to its growth potential.

And Randall & Quilter would appear to be a terrific all-rounder given that the number crunchers are also predicting juicy dividends in the near-term at least. In 2017 the business is expected to pay an 8.6 per share dividend, resulting in a market-mashing 5.9% yield.

IT master

Servelec Group (LSE: SERV) is another London-quoted stock that should deliver pleasing returns for both income and growth seekers, at least if current analyst projections are anything to go by.

In 2017 the company is expected to generate a 22% earnings increase, creating a delectable forward P/E ratio of 14.2 times as well as a PEG multiple of 0.6. And the Sheffield-based business is expected to keep this uptrend going with a 9% bottom line increase next year.

As I already said, Servelec provides plenty to get excited about on the dividend front too. An estimated 6p per share payout, if realised, would mark a decent upgrade on 2016’s 5.65p dividend and yields a chunky 2.1%. And the yield stomps to 2.3% for next year, thanks to a predicted 6.4p reward.

The IT services provider returned to profits growth in the first half of 2017, the vast sums it had ploughed into product development helping to drive orders once again and to rebuild relationships with its previous clients. And with conditions across many of its key markets also improving, I reckon Servelec could be about to deliver a period of sustained earnings growth.

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Royston Wild has no position in any of the 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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