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2 stocks I’d buy after FY results

March is a busy month for company results, and that gives us a chance to examine some that we might normally pass over. Here are two that look potentially exciting to me.

An undervalued small cap?

Charles Taylor Consulting (LSE: CTR) is a smaller company that I’ve liked the look of for a while. Charles Taylor provides professional services to the insurance industry, which is looking healthier now than it’s been for some years, and I reckon that should lead the way to nice profits for related service firms.

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After a few tough years when the sector was in a slump, Charles Taylor has been rebounding nicely, with EPS growth of 40% reported in 2015. And it’s just reported a further rise of 11.5% for the year ended December 2016, after revenue rose by 18.1% to £169.3m and adjusted pre-tax profit gained 4% to £14.8m. Debt was up to £37.5m, though the firm described that as a return to “normal levels“.

The dividend was lifted by 5% to 10.5p, with further inflation-busting increases already forecast for this year and next, which would push the yield to 4.5% and more.

Chief executive David Marock said the firm is reinvesting to drive growth “both organically and by undertaking strategic acquisitions, entering into joint ventures and making business investments” and is looking to “create opportunities to drive future growth in the medium to longer term“.

What I’m seeing here is a company looking forward to a decent growth phase and valued quite modestly for that on a forward P/E of 11, dropping to 10.4 on 2018 forecasts. On top of that, we also have a firm that is strong on cash generation and able to offer progressive and well-covered dividends. Looks like a winner to me.

Gambling growth

In 32Red (LSE: TTR) I see a stock that would have greatly excited a younger me, back when growth investing was my thing. I’m seeing a young-ish company in a relatively new market, whose earnings have really started to take off and whose shares are still priced attractively on classic growth metrics.

Results have just been released for what the firm called “a record year for revenue and profit” in 2016, with net gaming revenue up 28% to £62.3m and EBITDA more than doubling to £10.6m. Diluted earnings per share soared to 6.93p and the dividend was hiked by 89% to 5.3p per share.

Still in its early days, the worldwide online gambling business is still feeling its way forward regarding regulation and taxation, and that’s something that has given a few firms the occasional setback. But 32Red says that 77% of its net gaming revenues now come from regulated and taxed markets, and that seems to represent a maturing of the business and a reduction of risk.

What’s the growth valuation looking like now? EPS growth looks set to slow a little, which is to be expected, but with 20% on the cards we’d still see a forward PEG of 0.7 for this year — and it would fall to 0.6 a year later with another 18% earnings rise penciled in.

There’s always the same big risk with shares like this — the first time results come in slightly behind expectations, we usually see a desertion by early investors and a share price drop.  But with two years of attractive PEG valuations in the pipeline, growth investors would do well to look beyond that.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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