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

A pastel colored growing graph with rising rocket.
Investing Articles

How much passive income could I make for every £1,000 invested in Aviva shares?

Even a relatively small investment in Aviva shares could generate much greater passive income, particularly if the dividends are reinvested…

Read more »

Close-up of British bank notes
Investing Articles

I’m considering 100 shares in this FTSE 250 gem to aim for £300 a month in dividends

Mark Hartley outlines why a lesser-known banking stock from the FTSE 250's worth considering for an income portfolio in 2024.

Read more »

Investing Articles

History suggests these UK shares might soar if interest rates are cut in August

Some UK shares could rocket if interest rates fall from its 5.25% high next month. And there's one our writer…

Read more »

Female Doctor In White Coat Having Meeting With Woman Patient In Office
Investing Articles

Here’s why H1 results could boost the AstraZeneca share price

The AstraZeneca share price has been a success story in the past five years. With H1 results due, can it…

Read more »

Investing Articles

£17,365 in savings? Here’s how I’d use it to target a £6,700-a-month passive income

Here's how a lump sum investment could pave the way for me to make a four-figure monthly passive income in…

Read more »

Investing Articles

Down more than 10% in 6 months, Fools are backing these 5 UK stocks to reverse that – and then some! – by 2025

Some of our UK free-site writers have put forward their candidates for turnaround stocks!

Read more »

Investing Articles

Down 23%! Should I buy more CrowdStrike shares for my Stocks and Shares ISA?

Sometimes bad news can be good news for long-term investors. But is that the case for CrowdStrike in relation to…

Read more »

Investing Articles

2 UK shares near 52-week lows I’m considering snapping up

These UK shares are loitering near, or at, 52-week lows. Are these prime opportunities for our writer to boost her…

Read more »