The Motley Fool

These dirt-cheap monster growth stocks could crush the FTSE 100

Image source: Getty Images.

Every investor wants to beat the rest of the market, but outperforming the FTSE 100 isn’t as easy as it first seems. You need to pick your bets carefully if you want to outsmart the rest of the investment community.

Today I’m looking at two companies that might help you do just that.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Unloved and underappreciated

Vehicle rental specialist Northgate (LSE: NTG) is the company investors love to hate and for good reason. Over the past five years, the stock has produced a total return of 5.9% per annum, and over the past 10 years, it has delivered a total return of -9.3% per annum — that’s including dividends.

So, why do I think the performance is going to change any time soon?

Well, Northgate is currently in the middle of a transformation programme. At the beginning of October last year, management outlined a set of self-help measures to help improve profit margins and returns on invested capital. 

And it seems as if these efforts are already starting to pay off. In a trading update issued today, Northgate announced that the number of vehicles on hire (VOH) for the fiscal quarter ended 30 April increased 7.9% year-on-year to 85,700 mainly thanks to the group’s Spanish operations (around 50% of the business) where the number of VOH during the period grew 14.1%. 

According to management, this growth reflects “the continuing success of Northgate’s cross-selling and bundled propositions.” The firm has also been able to benefit from the collapse of a competitor, which allowed it to acquire 3,200 vehicles (as well as customers) at what is likely to be a knockdown price.

City analysts had been expecting the company to report a decline in earnings per share for fiscal 2018 of 26%, but looking at the above numbers, I believe these estimates are too conservative. With this being the case, I also think Northgate’s current valuation of 11 times estimated forward earnings undervalues the business and its current prospects.

Income champion 

Another company I’m positive on the outlook for is Evraz (LSE: EVR).

This FTSE 100 constituent is already beating the broader index in 2018. The stock is up 50% year-to-date compared to a gain of just 0.4% for the FTSE 100 excluding dividends.

There could be further gains for the shares ahead as investors wake up to the opportunity here. For example, based on current City estimates, shares in Evraz are trading at a forward P/E of just 6.8, as earnings per share are expected to leap 57% this year. Unfortunately, due to the nature of the business the company operates in — the production of steel and related commodities — earnings are naturally volatile, so next year analysts have pencilled in a decline of 31% in earnings per share.

Still, Evraz has a history of returning all excess cash generated from operations to investors. The company is not expected to break from tradition this year and analysts have pencilled in a prospective dividend yield of 8.1% for the full year, followed by a 6.3% for 2019. 

Put simply, even though earnings are expected to slide, Evraz is set to remain a dividend champion, and this should help the company outperform the broader market on a total return basis.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Northgate. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.