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Two overlooked bargain growth stocks I’d buy today

I noticed a modest share price rise for Tatton Asset Management (LSE: TAM) after the firm released a trading update on Tuesday, ahead of interim results due on 5 December.

Not heard of it? The company offers discretionary fund management (DFM) and IFA and mortgage support services, and things sound like they’re going well. Funds under management on its DFM platform rose to £4.44bn, from £3.85bn at 31 March — and fund inflows are apparently running at more than £80m per month.

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The firm’s IFA services arm, Paradigm Partners, has seen membership rising to 356 firms (from 352 in March), with Paradigm Mortgage Services seeing membership up to 1,143 firms.

Tatton doesn’t have much public history, having only floated on AIM as recently as July 2017, but analysts are already predicting good things.

Attractive valuation

The forward P/E for the end of this year might look a little high at around 21, but forecast rises in earnings per share would drop that to 17 by 2019, and indications of a strongly progressive dividend suggest a 2019 yield of 4.1%.

If that comes off, it will be a cracking start to life on the stock market.

Chief executive and founder Paul Hogarth spoke of “the increasing demand for a low cost DFM service to the mass affluent market place served by the IFA sector“, and that looks to me to be the company’s main attraction — it’s offering a range of closely related services which should feed into and support each other.

Despite the economic uncertainty we currently face (or perhaps even because of it), I reckon Tatton’s services should be in demand from its targeted clientele sector in the coming years.

Cash from rubber

Turning to a wildly different sector, I’m quite taken by the fundamentals exhibited by Anglo-Eastern Plantations (LSE: AEP). The company produces palm oil and rubber from plantations across Indonesia and Malaysia, and both of those commodities are in huge demand — though ethical issues regarding the destruction of rain forest in places like Borneo might put some investors off.

Over the last 12 months, the Anglo-Eastern share price has soared by 85% to 870p, with some of that surely due to impressive interim results. 

Revenue in the half climbed by 70% to $146.9m, with pre-tax profit up 83% to $31.6m and earnings per share (EPS) more than doubling to 46 cents. Total net assets at 30 June stood at $470.6m (approx £357m) — and that’s more than the firm’s market capitalisation of £346m, so the shares are trading at a discount.

Discounted valuation

On the P/E front, the shares are looking attractively valued to me, despite their impressive appreciation over the past year. With EPS expected to grow by 83% this year, we’re looking at a multiple of only 7.2 and a PEG ratio of a mere 0.1 — growth investors usually get excited by anything under 0.7, but we do have to temper this with Anglo-Eastern’s erratic year-on-year earnings.

The business of investing heavily in new plantations and not seeing profit from them until a few years later would account for some lumpiness in earnings, but that really shouldn’t matter to long-term investors.

The company has several biogas plants up and running now which provide electricity that it will sell to the national grid, in Bengkulu, Kalimantan and North Sumatra, and that will add a little to the bottom line.

There could be environmental hurdles ahead, but the shares look good value to me.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool UK has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. 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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