The Motley Fool

2 growth and income bargains on my watchlist

At the beginning of 2014, Utilitywise (LSE: UTW) was riding high. Then concerns over the company’s business model began to surface and shares in the utility services firm began to slide. Today, at just over 110p, shares in the company are down a full 70% from their peak of 367p reached at the beginning of 2014.

However, after these declines shares in Utilitywise look exceptionally cheap and support a dividend yield that is near twice the market average. Indeed, the shares now trade at a forward P/E of 6 and support a dividend yield of 5.8%. The dividend payout is covered more than twice by earnings per share. Further, analysts have pencilled in earnings per share growth of 16% for the fiscal year ending 31 July 2017, followed by growth of 13% for the following fiscal year. The dividend payout is expected to grow by 10%, leaving the company yielding 6.3%.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

So, why is the market avoiding Utilitywise? The company has taken plenty of flak in recent years over the way it books customer transactions and recognises revenue. Utilitywise tends to book sales early before it receives payment from customers, a risky strategy, especially when most of the company’s customers are small businesses. With a Brexit-inspired economic slowdown on the horizon, investors have taken fright, as small businesses are usually the first to feel the pain in a recession.

Restoring confidence

However, management is trying to restore confidence in the company. Alongside the group’s most recent set of results chief executive officer Brendan Flattery declared that the firm has decided to end the practice of taking cash advances from suppliers. A number of prior-period restatements and the non-cash impairment of Utilitywise’s investment in t-Mac were also implemented to help “improve the transparency of the balance sheet.

As yet, the City seems unconvinced, but it’s clear that management is trying to improve the group’s reputation. Utilitywise’s low valuation may discount some of the risk of investing in the firm as it attempts to rebuild and that’s why the company is on my watchlist. 

Set for a rebound? 

Bonmarché (LSE: LSE) is another company that’s fallen on hard times and after recent declines looks cheap. Over the past two years, shares in the company have lost nearly 70% and currently trades at a forward P/E of 7.6, supporting a dividend yield of 7.5%. The payout is covered 1.8 times by earnings per share.

Bonmarché’s stock collapsed during 2016 as management slashed earnings expectations. From a high of 21p, earnings per share plummeted to 10p for the year ending 1 April 2017. After this downgrade, it’s clear why the shares took a tumble. However, City analysts expect the group to return to growth of this fiscal year with earnings per share growth of 27% pencilled in and further growth of 21% expected for the following fiscal year. 

If the company can hit these targets, then the shares look exceptionally cheap on both an income and growth basis. If management fails once again, then the shares could have further to fall. But its already low valuation may help limit the downside.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert Hargreaves 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.