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2 FTSE 250 growth stocks I think have more to give in 2020

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I’ve been taking a renewed interest in the FTSE 250, looking for undervalued growth and income shares and, today, I’m examining two I think could have long-term potential.

John Laing (LSE: JLG) shares dropped 8% Thursday morning, on the release of what it described as “mixed” H1 results. Though the infrastructure management specialist told us its full-year outlook was unchanged, an 80% slump in pre-tax profit, to £35m from £175m at the same stage last year, has given shareholders a shake.

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The fall seems to be down to one-offs. Last year’s figures were boosted by the sale of one of the firm’s investments for £87m, and that skews the comparison.

Write-downs

This year, problems at three renewable energy assets in Australia led to a £66m write-down, with a further £55m hit coming from performance issues at European wind energy developments — where it seems it wasn’t windy enough! Laing has put new wind and solar investments in Australia and Europe on hold.

While the day’s price dip might look worrying, the shares are still up 95% since flotation in 2015 — but the chart looks like a growth stock just coming off the rails. John Laing shares, however, are definitely not on a growth valuation.

If the firm’s full-year outlook is genuinely unaffected, we’ll be looking at a forward P/E of under eight. No problem on that score, but in Laing’s business it’s important to look at the value of its infrastructure investments. A quoted net asset value per share of 325p is very close to the 350p share price, and I think that’s undervaluing the business itself.

Great year

I’m turning now to a company I last looked at in December 2018, James Fisher & Sons (LSE: FSJ), which I had down as a candidate to do well in 2019. Since then, the shares are up 17%, so I sometimes get it right — though, naturally, I didn’t buy any.

But what does the marine engineering and support services provider look like today? The full-year ended with a 14% rise in earnings, and the firm upped its dividend by 10% to 31.6p per share. We heard that “with a strong pipeline of opportunities at the start of 2019, the Board has a high degree of confidence for the year ahead,” and that pipeline has since been delivering new contracts (on top of the £30m submarine rescue service deal done just before the end of the year).

Contracts

An update last month revealed a number of new offshore renewable energy contracts with a total value of approximately £30m, and a new five-year contract with the Ministry of Defence to support the Royal Navy’s fuelling requirements.

This month, Fisher announced the acquisition of 60% of Brazilian offshore oil services firm Serviços Marítimos Continental for a total of £7.5m (with £2.6m of that not due until 2022), and that looks like a smart move to me.

My only reservation is the current share price valuation, pushed up to a forward P/E of 22 with only single-digit EPS growth penciled in for this year and next. If I owned the shares I’d continue to hold, and I think it’s one to buy on the dips.

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Alan Oscroft has no position in any of the 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.

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