These 3 growth stocks still look dirt cheap despite the FTSE hitting all-time highs

Harvey Jones is hunting for growth stocks that have missed out on the recent FTSE 100 rally and still look good value. These three grab him.

| More on:
Young Caucasian woman with pink her studying from her laptop screen

Image source: Getty Images

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.

I get nervous buying growth stocks after the market has been on a tear, because I fear overpaying at the top of the cycle. I’m happier when the market is down in the dumps, and there’s a chance of buying at the bottom.

This makes me nervous buying FTSE 100 growth stocks today, as the index breaks new all-time highs. Yet a number of stocks still look really good value, including these three.

Lloyds of London insurer Beazley (LSE: BEZ) looks super cheap trading at just 4.18 times trailing earnings. Especially with the FTSE 100 as a whole trading at 12.4 times.

Bargain shares

I expected to see dismal share price performance but in fact the Beazley share price is up 17.06% over the last three months, and 9.53% over the year.

Beazley got a real lift on 7 March, when it reported that full-year 2023 profits before tax jumped 155% to a record $1.25bn. Gross premiums have been climbing for years but there’s a key metric it has no control over, and that’s claims. Costs rocketed during the pandemic, for example, plunging Beazley to a loss.

Investors get a modest dividend, with the yield currently 2.23% a year, but the board recently agreed to a generous $325m share buyback programme. It’s a successful company going cheap, and I’m tempted to buy it.

Here’s a cheap growth stock I did buy recently: JD Sports Fashion (LSE: JD). I’d been standing on the sidelines for years, watching its shares grow and grow, but decided I’d left it too late to join the fun. 

I spotted my chance on 4 January, when its shares crashed 20% after the board warned profits would be £125m lower than predicted after a poor festive trading period. I bought them on 22 January.

A trading update on 28 March suggested JD had stopped the rot, although the “challenging” market was still causing issues. My position is up a modest 4.38%. I think there’s still a buying opportunity here, with the JD Sports share price down 26.08% over 12 months.

The FTSE 100 is flying

The stock looks decent value, trading at 8.68 times trailing earnings. Sports and fashion retail is a tough market but with a five-year view, I’m optimistic.

Meanwhile, British Gas owner Centrica (LSE: CNA) is incredibly cheap trading at just 3.39 times earnings. That’s particularly surprising given that its shares have been going gangbusters, up 19.75% over 12 months and 142.83% over three years.

The Centrica share price got a real boost from the energy shock, but suffered as gas and oil prices retreated in 2023. Adjusted operating profits plunged from £3.3bn in 2022 to £2.72bn, a drop of 17.6%.

The board nonetheless hiked the dividend by 33% to 4p a share. Yet it’s not a super-high income stock, with a modest trailing yield of 2.99%. Centrica has warned that revenues will fall in 2024, based on the assumption that the oil price would continue to decline. That may change though. Much now depends on the Middle East.

JP Morgan recently highlighted how cheap Centrica is today. It reckons the group’s £1bn share buyback could be extended by a further £500m from the summer. We’ll see. Given the low valuation, I’m tempted to buy it today.

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.

Harvey Jones has positions in JD Sports Fashion. 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

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Should I increase my stake in Legal & General or buy great value Aviva shares instead?

Aviva shares have had a strong year, which is bad news for Harvey Jones who bought FTSE 100 rival Legal…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

If I’d bought Lloyds shares a year ago, here’s what I’d have now

It looks like the value of my long-held Lloyds shares is moving me into profit in 2024. Are the UK's…

Read more »

Investing Articles

Here’s how I’d target a £5,900 second income by investing £50 a week

We don't need a huge pile of cash to earn a second income. Here's one way I'd aim for it…

Read more »

Grey cat peeking out from inside a cardboard box in a house
Investing Articles

Recently released: May’s small-cap stock recommendation [PREMIUM PICKS]

We believe the UK small-cap market offers a myriad of opportunities across a wide range of different businesses and industries.

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’m listening to Warren Buffett and buying bargain shares!

Our writer has been taking lessons from the investing career of Warren Buffett. Here's how he's using it to try…

Read more »

Close-up of British bank notes
Investing Articles

Here’s how I’d spend £6,900 on income shares to try and earn £500 per year

Christopher Ruane outlines some of the investment principles he'd apply when trying to earn £500 of dividends annually by spending…

Read more »

Newspaper and direction sign with investment options
Investing Articles

My 3 picks for the best UK shares to buy in June

Mark David Hartley is bullish about the UK stock market right now. He reckons these are the three best shares…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

23% per annum: is this FTSE 250 stock too good to turn down?

FTSE 250 constituent Games Workshop has posted an impressive return over the last five years. This Fool takes a closer…

Read more »