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2 recovering growth stocks I’d buy today

In the last year, the property and retail sectors have experienced a difficult period. Investor sentiment has declined at times towards both industries, leaving investors with paper losses in some cases.

This situation, though, could present an opportunity for long-term investors to buy stocks offering wide margins of safety. Certainly, the risks may be relatively high. But the rewards could also be considerably above average. With that in mind, here are two stocks which could be worth buying now for the long run.

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An improving business

Within the retail sector, Sports Direct (LSE: SPD) has endured a difficult period. It has suffered from negative media coverage and has seen its profitability come under pressure as international expansion plans have not progressed as planned.

However, the company’s performance appears to be stabilising according to a trading update released on Wednesday. It is on track to meet its current year financial forecasts, and even expects to post a rise in EBITDA (earnings before interest, tax, depreciation and amortisation) of between 5% and 15% in the 2018 financial year.

The company is seeking to become the ‘Selfridges’ of sport. This transition is delivering a major store refresh programme which has the central aim of improving the customer experience. This could help to boost customer loyalty, which may lead to improved sales and margins in future.

With the company forecast to grow its bottom line by 17% in the next financial year, it seems to be moving in the right direction. It has a price-to-earnings growth (PEG) ratio of just 1.3, which suggests there is a wide margin of safety on offer.

Certainly, the outlook for UK retailers remains tough and Sports Direct is seeking to make changes to its business at a difficult time. But for the long run, it appears to have upside potential.

Potent mix

As mentioned, the property sector has also experienced an uncertain year. Commercial property in particular has seen valuations come under pressure, but logistics-focused real estate investment trust (REIT) Tritax Big Box (LSE: BBOX) seems to be making encouraging progress nonetheless.

The company is expected to see its bottom line increased by 2% this year despite an uncertain operating environment. However, next year it is forecast to post a rise in earnings of as much as 12%. This has the potential to positively catalyse its share price, with it trading on a PEG ratio of just 1.7 at the present time.

In addition, Tritax Big Box has a dividend yield of 4.5% at the present time. Dividends could rise in future due to the company’s bright forecast earnings growth rate, and this could make its shares more popular among investors. Inflation continues to move higher, and a desire for a real return could make it an even more attractive buy for the long term.

Clearly, the outlook for commercial property could worsen. But with a wide margin of safety and strong income prospects, Tritax Big Box seems to be worth buying right now.

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Peter Stephens does not own shares in any of the companies mentioned. The Motley Fool UK has recommended Sports Direct International. 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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