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2 under-the-radar growth stocks I’d buy today

Finding shares which have a mix of high growth potential and low valuations can be challenging. That’s especially the case when the FTSE 100 has experienced a bull run in recent years, since some stocks may now appear to be somewhat overvalued. However, it is still possible to find strong value opportunities among large, mid- and small-cap stocks. Here are two prime examples which seem to be undervalued based on their outlooks.

Bright future

Reporting on Thursday was international designer, manufacturer and distributor of innovative floor coverings Victoria (LSE: VCP). The company released an AGM update which said that it is continuing to make good progress in its key UK, European and Australian markets. It’s also on track to meet all of its objectives for the full year, while continuing to seek acquisition opportunities to supplement organic growth prospects. It is particularly focused on Europe when it comes to M&A activities, believing there are a number of potential opportunities in the region.

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Looking ahead, Victoria is expected to post a rise in its bottom line of 22% in the current year, followed by further growth of 10% next year. Despite this upbeat growth outlook, it trades on a price-to-earnings growth (PEG) ratio of just 0.9 at the present time. This suggests that there could be a wide margin of safety on offer, as well as the potential for a significant upward rerating over the medium term.

Victoria’s international focus may benefit future performance. UK interest rates are expected to remain low in future years, and when coupled with the uncertainty surrounding Brexit leading to an even weaker pound, this may create a positive currency translation adjustment and boost its profitability and share price yet further.

Growth potential

Also offering upbeat growth prospects at a fair price is financial services company Old Mutual (LSE: OML). It is currently going through a major restructuring which will see it split into four smaller units. This could lead to greater efficiencies in the long run, as well as a higher premium when it comes to stock market valuations.

Looking ahead, the overall group is expected to post a rise in its bottom line of 9% this year, followed by further growth of 7% next year. This is ahead of the FTSE 100’s forecast growth rate during the same time period. Despite this, Old Mutual trades on a PEG ratio of just 1.4 at present, which suggests it could enjoy further share price growth after the 10% rise of the last month.

As well as its growth and value potential, the company has a dividend yield of 3.5% from a payout which is covered three times by profit. This suggests that future dividend growth could be high, which may act as a further catalyst on investor sentiment in the long term.

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Peter Stephens owns shares of Old Mutual. 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.

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