2 cheap growth stocks I’d buy in April

These two shares could deliver high returns due to their wide margins of safety.

| 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.

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.

With stock markets having fallen in recent months, there are now wider margins of safety on offer. That could provide investors with more favourable risk/reward ratios for the long run.

Certainly there’s no guarantee that the recent declines in share prices will now end. Investor sentiment could worsen if the prospects for the world economy come under pressure. But the long-term investment opportunities on offer now appear to be more widespread.

With that in mind, these two growth stocks could be worth buying now for the long term. And both companies appear to offer growth at a reasonable price.

Improving performance

Reporting on Wednesday was digital communications company Next Fifteen (LSE: NFC). The business enjoyed a strong performance in its financial year to 31 January, with revenue increasing by 15% and operating profit moving 20% higher. Organic revenue growth was 5.2%, thanks to a surge in the second half of the year. This trend has continued into the new financial year, which suggests that further growth could be ahead for the business.

Next Fifteen’s acquisition strategy also appears to be working well. Its financial position provides opportunities for the company to boost its revenue and profitability, and this could help it perform well in future years.

With a price-to-earnings (P/E) ratio of around 14, it seems to offer good value for money at present. Although interest rate rises and higher inflation could hold back world economy performance to some degree, the overall prospects for global growth seem to be positive. With a low valuation and a solid strategy that has performed well in previous years, Next Fifteen now seems to be a worthwhile buy.

Potential turnaround

While a number of companies have enjoyed strong performance in recent years, easyJet (LSE: EZJ) is not one of them. It has experienced highly challenging trading conditions that have caused two consecutive years of declining earnings. Reduced demand from passengers — due in part to the threat of terrorism — has contributed to its disappointing performance. This has left investor sentiment relatively low.

However, with easyJet expected to generate earnings growth of 28% in the current year, followed by 20% next year, it looks set to deliver a turnaround. This could lead to improving investor sentiment, with its price-to-earnings growth (PEG) ratio of 0.6 suggesting that it may offer a wide margin of safety.

Additionally, easyJet is due to increase dividends per share at a rapid rate over the medium term. For example, it’s expected to yield 4% in the next financial year. And with dividend payments forecast to be covered twice by profit, they seem to be highly affordable. This could lead to significant income investing potential – especially since the company’s bottom line is forecast to rise at a fast pace as passenger numbers increase.

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.

Peter Stephens owns shares of easyJet and Next Fifteen Communications. The Motley Fool UK has recommended Next Fifteen Communications. 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

Empty Stocks and Shares ISA? I’d snap up these 3 stocks to start with!

Sumayya Mansoor explains how she would start to build wealth from scratch with an empty Stocks and Shares ISA and…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

7.7% yield and going cheap! Why is this unknown FTSE 250 stock flying?

It's no household name, but there's one FTSE 250 stock with a high dividend yield and booming profits that looks…

Read more »

Photo of a man going through financial problems
Investing Articles

I’d stop staring at the Nvidia share price and buy this FTSE 100 stock instead

This writer reckons there is a smarter way to invest in Nvidia today without taking on stock-specific risk. Here is…

Read more »

Young lady working from home office during coronavirus pandemic.
Top Stocks

5 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Young Asian man drinking coffee at home and looking at his phone
Dividend Shares

These 3 FTSE 250 stocks offer me the highest dividend yields, but should I buy?

Jon Smith considers FTSE 250 shares with a very high yield, but questions whether the income is going to be…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Is FTSE 100 takeover target DS Smith a great buy?

A mega-merger between FTSE 100 giants DS Smith and Mondi has the City abuzz. But is there any value in…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

The WPP share price dips as profits fall. Here’s why it could be a top dividend buy

I'm starting to think the WPP share price undervalues the stock, especially if the long-term dividend outlook comes good.

Read more »

Black father and two young daughters dancing at home
Investing Articles

A £3K investment buys me 632 shares in 2 stocks for a second income!

This Fool explains how a second income is possible through dividend-paying stocks and details two picks that could help her.

Read more »