2 bargain stocks offering double-digit earnings growth

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

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

More on Investing Articles

Investing Articles

UK investors are piling into Vodafone! Should I buy this FTSE 100 stock?

This ultra-cheap FTSE 100 dividend stock has been very popular among retail investors lately. What might they be seeing in…

Read more »

Market Movers

This FTSE 250 value stock is up 11% today! Here’s what’s going on

Jon Smith explains why a FTSE 250 stalwart is shooting higher today on fresh news and talks through why this…

Read more »

Inflation in newspapers
Investing Articles

£276bn worth of reasons to invest in UK shares?

Our writer prefers investing in UK shares to holding cash. However, he acknowledges that this approach does carry some risks.

Read more »

Investing Articles

Here’s the latest growth and share price forecasts for Nvidia stock

Nvidia is due to report Q4 results towards the end of February. Should I buy the stock in anticipation of…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Is the party over for the S&P 500 as Trump’s tariffs loom?

Donald Trump's planned tariffs have cast doubts on the future performance of the S&P 500. What should investors do now?

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Warren Buffett continues to invest in this well-known pizza company

Warren Buffett just bought another 1.1m shares in Domino’s Pizza. Should investors follow him into the well-known fast food company…

Read more »

Investing Articles

A £100 weekly income from a Stocks and Shares ISA? It’s possible!

Mark Hartley details how a combination of good stock picks and patience could transform a Stocks and Shares ISA into…

Read more »

Young black colleagues high-fiving each other at work
US Stock

Why Apple stock could be set to soar with the new Alibaba partnership

Jon Smith explains why a new deal relating to the Chinese market could be good news for Apple stock, not…

Read more »