2 exciting growth stocks you can’t afford to ignore

These two companies appear to offer growth potential which has not been picked up by the market.

| 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.

Perhaps the most satisfying part of investing is finding stocks which appear to be undervalued. After all, with the FTSE 100 trading near an all-time high and the stock market being relatively efficient, finding bargain shares seems more difficult than ever. However, there are still opportunities available. Here are two stocks which could deliver exciting growth in future years.

Impressive performance

While the UK economy appears to be experiencing a rather challenging period as Brexit looms, Hollywood Bowl (LSE: BOWL) reported upbeat performance on Wednesday. The UK’s largest ten-pin bowling operator recorded total revenue growth of 7.8% and like-for-like (LFL) revenue growth of 1.2%. This is despite the Easter trading period falling in the second half of the year for 2017, compared to in the first half of 2016. This is estimated to have reduced LFL sales growth by around 2%pts.

Looking ahead, the company’s expansion plans are on track. It expects to open two prime location centres per annum, and already has six centres signed up to provide the pipeline until 2020. Alongside a refurbishment programme which is aimed at improving the customer experience, this should allow the business to deliver improved performance in future.

Trading on a price-to-earnings (P/E) ratio of 15.8, Hollywood Bowl seems to be rather highly valued. However, when its earnings growth forecast of 13% for next year is factored-in, its price-to-earnings growth (PEG) ratio of 1.2 seems fair. Clearly, the UK economy could experience a difficult period as inflation moves higher and consumer spending looks set to be squeezed. However, the company seems to have a sufficiently wide margin of safety to merit investment.

Turnaround potential

Following a 35% fall in its share price in the last year, talent representation and sports marketing company TLA Worldwide (LSE: TLA) could be a strong turnaround play. A key part of this is its forecast earnings growth rate of 33% in the current financial year. This puts its shares on a PEG ratio of just 0.2, which indicates that the market may be undervaluing the business.

According to its most recent update, the company’s Events portfolio continues to perform well. It has a strong pipeline of events over the short term, while the Baseball Representation Platform also appears to have growth potential. It has also enjoyed some success in signing new clients within its Sports Marketing division, while there is the potential to continue to expand into new territories over the medium term.

With dividends increasing by 15% at the interim stage of the year, TLA Worldwide now yields around 3.2%. Looking ahead, further double-digit increases could be on the cards, since the company’s shareholder payouts are covered 3.7 times by profit. This shows that as well as offering a relatively low share price and earnings growth potential, TLA Worldwide could become a stronger income stock over the coming years.

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 has no position in any 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

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

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

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »