2 bargain growth stocks that could make you a millionaire

These two ‘hidden’ growth stocks are easy to overlook.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The five-year share price chart for Genel Energy (LSE: GENL) might not make your mind immediately reach for the word ‘growth’. In fact, since a peak of over £11.40 in early 2014, there’s been a slump of nearly 90% to today’s 122p. 

But if we look closer, we see the shares have started to climb back, more than doubling since late March 2017. There’s a good reason for that growth spurt, which I think could be the start of a nice long-term run — and my confidence is boosted by Thursday’s update.

Genel’s problems had largely been twofold. Firstly, remaining reserves in its key Taq Taq field in the Kurdistan Region of Iraq had been downgraded. And more worryingly, the company had been struggling to get payment for the oil it was shipping — and that led to a big loss in 2016.

Cash flowing

But a third-quarter update Thursday reiterated that the company had reached a “landmark settlement” with the Kurdistan regional government, which has led to regular payments so far this year. And production is going as planned.

Unsurprisingly, Genel says that should “materially enhance our cash flows“, but pointed out that even before the start of payments, the company was still generating “meaningful free cash flow” and reducing its debt.

Analysts are already predicting a return to profit this year, followed by a near doubling in earnings per share (EPS) for 2018 — and that would drop the P/E to under 12, which looks like a good valuation to me.

The oil business in Iraq is clearly not without risk, but I reckon the growth story should be back on for Genel. And I see the shares as a bargain right now.

A Woodford pick

The housebuilding business is down in the dumps right now, but you’d never guess by looking at Countryside Properties (LSE: CSP). Neil Woodford snapped up a load of Countryside shares this summer and his funds now hold 10% of the company. It’s not hard to see why.

In 2016, Countryside’s EPS nearly trebled to 16.3p, and the City’s experts are predicting further growth this year of 66%, followed by another 27% in 2018. But that expected rate of growth looks well hidden by the shares’ forward P/E ratings, which would drop from a mooted 13.5 for the end of 2017 to just 10.5 a year later.

And that gives tasty PEG ratings of just 0.2 and 0.4 for the two years, which should have those growth investors who look for 0.7 or less jumping with excitement.

But that’s not all. Countryside is also handing out decent dividends. Now, the forecast yield of just 2.2% this year is not up there with the 6.7% expected from Taylor Wimpey or the 4.8% from Persimmon.

But it’s strongly progressive. From nothing in 2015, through 3.4p per share last year, there’s 8.1p on the cards for this year and 10.35p for 2018. You don’t need to worry about inflation with dividend growth like that.

Strong year

In an update ahead of full-year results (due 22 November), Countryside reported a 28% rise in completions to 3,389 homes, with a private forward order book up 8% to £242.4m. Average private selling prices dropped 8% to £430,000, but I don’t read any fear of a price collapse into that.

The company has a strong land bank of 19,826 plots (of which 83% have been “sourced strategically“), after adding an extra 2,896 plots during the year.

Countryside Properties looks cheap to me.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »