2 bargain stocks offering double-digit earnings growth

Royston Wild looks at two cheap shares with exceptional earning prospects.

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Investor appetite for Findel (LSE: FDL) has gone crazy in Wednesday trading, a development that comes as little surprise given the strength of today’s latest trading statement.

The retail and education group was last 30% higher from Tuesday’s closing price, breaking out of the recent downtrend that had seen it sink to 17-month lows just last week. And I believe today’s uptick could mark a new beginning for the share price.

Findel declared today that, with revenues jumping 6.1% in the six months to September to £226m, that adjusted pre-tax profit blasted to £11.9m from £1.9m a year earlier.

The positive result again underlined the bright outlook for its core Express Gifts arm. Like-for-like sales here exploded 15.8% in the first half, reflecting in part Findel’s decision to start marketing for the Christmas period in September rather than October.

The small-cap noted that improved marketing activity at its Studio.co.uk brand, combined with its improved customer retention rates, prompted customer numbers to climb by 230,000 from the corresponding 2016 period. It now boasts an active base of 1.7m active users.

Don’t look this gift horse in the mouth

With sales taking off again, City analysts are expecting Findel to recover from recent earnings reverses and deliver stonking profits growth during the medium term — bottom-line expansion of 11% and 14% is currently expected for the years to March 2018 and 2019 respectively.

While pressures on the retail sector are likely to rise in the months and years ahead as British economic growth cools, exacerbating fragile consumer confidence as well as the strain on shoppers’ finances, I am confident that Findel’s focus on the value end of the market should help earnings to continue thriving.

And of course the country’s successful transformation of its Education division should also set it up to enjoy solid sales growth here. Findel said that, following initiatives such as improved customer websites and better prices during quarter two, that online orders had jumped to 25% this month from 10% back in March.

Despite Findel’s share price jump today the share can still be snapped up very cheaply. As well as boasting a forward P/E ratio of just 8.9 times, the company sports a corresponding PEG readout of 0.8. All things considered, I reckon the Cheshire business is an irresistible pick right now.

Jobs giant

Recruitment specialist Hays (LSE: HAS) is another stock predicted to enjoy a bulging bottom line.

The stock, which has a long history of delivering double-digit profits growth, is expected by City analysts to keep the run going with a 14% advance in the year ending June 2018.

These estimates make Hays pretty decent value too. A prospective P/E ratio of 16.9 times may not be much to shout about, although a corresponding PEG readout of 1.2 certainly is.

And there is plenty of reason to expect earnings to keep steaming higher. While pressures in its home market is cause for concern (like-for-like net fees in the UK rose just 1% during July-September), Hays enjoyed quarterly net fee performance in the period thanks to the strength of its overseas operations. In Asia Pacific and its aggregated Continental Europe & Rest of World division, like-for-like net fees shot 14% and 13% higher respectively in the quarter.

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.

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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