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This is the cheapest growth stock in the FTSE 250. But is it worth buying?

As the world becomes more and more connected, the demand for copper is only expected to grow. With this being the case, I find myself wondering why the market is avoiding shares in Kaz Minerals (LSE: KAZ), one of the world’s premier copper miners.

Up until 2016, I would have agreed with the rest of the market that Kaz deserved a wide berth. It was a speculative bet spending billions of dollars building new copper mines, which is always a risky endeavour. However, these bets started to pay off in 2016 when the group swung to a profit after several years of losses. Since then, earnings have exploded as Kaz’s new mines have come on stream and the business has reaped the rewards of its lengthy, and costly, capital spending programme.

For 2018, City analysts believe the company will report a net profit of $494m, rising to $537m next year. Based on these numbers, the shares are trading at a forward P/E of just 6 for 2018, falling to 5.8 for 2019.

Overstretched? 

So what’s gone wrong? It seems investors are once again concerned about the company’s expansion plans. A few months ago, Kaz announced that it had acquired a new copper mine in the Baimskaya region of Russia from Roman Abramovich for $900m. It’s not the initial price tag that seems to be worrying investors, but the capital spending required to get this mine up and running. Figures suggest Kaz will need to fork out $5.5bn to develop the Baimskaya prospect — a colossal sum for a business with a market-cap of only $3bn at the time of writing.

Nevertheless, considering the company’s record of developing mines, I think the chances that Kaz could pull this off are high, and that’s why I think now could be a good time to buy the stock. 

Kaz’s current valuation seems to suggest investors don’t think the company has a future. But if it does manage to develop Bimskaya successfully, then the upside could be tremendous. I’m highly attracted to the risk/reward here.

Rubbish investment 

If Kaz isn’t your cup of tea, then I also like the prospects for slow and steady Biffa (LSE: BIFF)

For 2018, analysts are expecting this rubbish (waste management) company to report earnings per share growth with 33%, and it looks as if the business is on track to meet this forecast. In its half-year report published today, CEO Michael Topham declared management growth “expectations for the full year remain unchanged.

As a result, I think the market is currently undervaluing Biffa and its prospects. The shares are changing hands right now for 11.2 times forward earnings, which would be appropriate for a low-growth business. But in my opinion, with earnings growing at a double-digit rate, a multiple in the mid-teens might be more attractive.

On top of the attractive valuation, investors can also look forward to a dividend yield of 2.9%. As the distribution is covered twice by earnings per share, the payout has room to grow substantially in the years ahead, and I can’t see any reason why it won’t.

So overall, if you’re looking for an undervalued income and growth stock, I reckon Biffa certainly deserves your research time.

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Rupert Hargreaves owns no share 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.