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One high-growth value stock I’d buy, and one I’d avoid

Accommodation giant Millennium & Copthorne (LSE: MLC) found itself on the defensive in Friday business following the release of mixed trading numbers.

A 1% decline may not be headline-worthy, but today’s update is unlikely to give market appetite a much-needed shot in the arm.

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Millennium & Copthorne announced that revenues grew 16% between January and June, to £485m, while pre-tax profits advanced 12.5% to £63m. Group REVpar (or revenues per available room) cantered 15.9% higher, the company noted, to £78.69.

But the latest release still detailed weakness in some of the company’s markets. While chairman Kwek Leng Beng said group results improved in the first half of 2017 on both a reported and constant currency basis, he added that “there is continuing pressure on the profitability of our hotel operations, particularly in North Asia and New York.”

While revenues weakness in Singapore appears to be “shallowing,” Kwek said that “RevPAR from Rest of Asia was down more sharply, in part as a result of geopolitical tensions impacting visitor arrivals in our hotels in Taipei and Seoul, especially from China.”

REVpar across the whole of Asia fell 3.7% during the first half. And while revenues per room grew 10% in New York, the company noted that this mainly reflected the increased contribution of ONE UN New York. Without this REVpar would have risen just 1%, and the company is now embarking on management changes in the Big Apple to improve sales and cut costs to halt ongoing underperformance.

In brighter news REVpar in the UK grew 10.7% year-on-year as the weak pound boosted tourist numbers. Still, this could not prevent room revenues across Europe falling 0.7% in the period.

Cheap but risky

The City expects earnings at the hotelier to continue moving higher despite the troubles across some of its territories. Current forecasts suggest a 27% bottom-line rise in 2017, and a 6% advance next year.

And these figures make Millennium & Copthorne something of a bargain on paper. Its forward P/E ratio of 14.8 times falls within the broad value terrain of 15 times or below. And a prospective PEG reading below the widely-regarded bargain benchmark of 1, at 0.5, underlines this assessment.

While these numbers may appeal to many value investors, the troubles Millennium & Copthorne faces to improve its fortunes in Asia and the US are considerable. I reckon risk-averse stock-pickers should perhaps shop around.

Wizzing higher

I am far more optimistic concerning the earnings outlook over at Wizz Air (LSE: WIZZ).

The cut-price flyer, which concentrates on the markets of Eastern Europe, saw revenues detonate 28.6% in January-June to reach €469.3m as passenger numbers kept on soaring. The company shifted 7.2m people in the first half, up 25.2%. And I expect these numbers to keep rising as Wizz Air’s route expansion programme continues.

City analysts expect the Hungarian carrier to report earnings expansion of 19% and 16% in the years to March 2018 and 2019 respectively. And these figures provide plenty of bang for your buck — the airline carries a forward P/E ratio of just 14.5 times and a PEG rating of 0.8.

Wizz Air’s share price keeps on soaring, and touched new record highs just below £28 late last week. I believe the flyer has what it takes to keep on ascending.

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Royston Wild 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.