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2 bargain basement stocks offering great earnings and dividend growth

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Latest trading details from RPC Group (LSE: RPC) fortified my faith that the business is one of the FTSE 250’s hottest bargains as of today.

The plastics manufacturer was last 3% higher on the day and trading at its highest since February after advising that revenues for the first half of the fiscal year “are projected to be well ahead of the corresponding period last year driven by the contribution from acquisitions, organic growth, polymer price tailwinds and translation benefits from foreign exchange movements.”

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What’s more, RPC said that, despite the impact of a modest increase in polymer prices, it expects margins and profitability to sail past its prior expectations.

And the Rushden-based company maintains a bullish tone looking ahead, commenting that “our investment in innovation for both product design and process engineering continues to drive a healthy pipeline, and the group remains confident of continuing to grow through the cycle ahead of GDP.”

RPC noted that investments made last year had driven good growth in China, and added that the integration of Letica in the US (which it acquired back in March) continues to progress well.

Plastic fantastic

My belief that RPC is set fair for robust earnings growth on the back of its bright M&A strategy and excellent organic sales opportunities is validated by bubbly broker forecasts too.

The calculator tappers are expecting bottom line expansion of 11% and 9% in the years to March 2018 and 2019 alone, and these projections make the FTSE 250 star sensational value for money — a prospective P/E ratio of 14.1 times falls below the broadly-regarded value watermark of 15 times, while a corresponding PEG reading of 1.3 is not to be scoffed at either.

And RPC’s appeal does not end here either, the company also providing plenty for income chasers to get excited about. Indeed, its solid earnings picture and stellar cash flows are expected to keep dividends growing at a fair lick, with last year’s 24p per share reward predicted to swell to 27p and 29.8p in fiscal 2018 and 2019 respectively.

These estimates yield a handy 2.8% and 3.1%.

Making waves

Those on the lookout for great growth and dividend stocks also need to take a long look at Communisis (LSE: CMS), in my opinion.

While earnings are expected to grow at a more muted rate than over at RPC, anticipated expansion of 3% and 4% in 2017 and 2018 is not to be sniffed at. And these forecasts make the marketing mammoth a darling with value chasers — it presently changes hands on a forward earnings multiple of 9.3 times.

Communisis is an even more staggering selection for growth dividend chasers. The 2.42p per share payment forked out in 2016 is predicted to rise to 2.6p in the current period, and again to 2.7p in 2018. These numbers yield 4.4% and 4.6%.

And looking further down the line. I am confident the company’s growing success with blue-chip clients in international markets (it now sources around 30% of revenues from abroad versus 24% a year ago) should lay the foundations for delicious shareholder returns in the years ahead.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended RPC Group. 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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