The Motley Fool

£2,000 to invest? I think these FTSE 250 stocks could double your money

Finding stocks that have the potential to double your money is difficult, but they are out there. I believe Avast (LSE: AVST) is one of these rare gems. 

Booming market

The company is a leader in cybersecurity, a market that’s seeing explosive growth. Analysts estimate worldwide spending on cybersecurity products was around $100bn in 2017 and is forecast to hit $170bn per annum by 2022. 

Sign up for FREE issues of The Motley Fool Collective. Do you want straightforward views on what’s happening with the stock market, direct to your inbox? Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio. Click here to get started now — it’s FREE!

Avast is trying to grab a small share of this market. Revenue was just $251m in 2015 and is expected to hit $869m for 2019. Analysts are expecting further growth in 2019. They’ve pencilled in revenues of $926m for 2020. 

Staying ahead of cybercriminals is essential if Avast wants to maintain its reputation. That’s why the company is spending more than $70m a year on research and development to do just that.

However, this spending is only a fraction of the group’s overall income. Last year, the firm reported an operating profit margin of nearly 40%. Therefore, most of Avast’s revenue growth goes straight to the bottom line. 

As sales expand, the City is forecasting earnings growth of 16% for 2019 and nearly 10% for 2020. These forecasts put the stock on a 2020 P/E of 13.8, which undervalues the business, in my opinion. Indeed, shares in London-listed peer Sophos are currently dealing at a forward P/E of 29.9, more than double Avast’s current valuation. 

That’s why I think Avast could double your money. Not only is the stock trading at a substantial valuation discount to peers, but it also looks as if earnings have the potential to continue to grow at a double-digit annual rate for many years to come. 

Booming profits

If Avast is not for you, then you might want to take a look at financial services group Investec (LSE: INVP). Over the past five years, shares in Investec have fallen by around 20% excluding dividends. But despite this performance, the company’s underlying business is much stronger today than it has ever been.

The share price might have declined 20% since 2014, but net income is up 60% over the same period. Meanwhile, Investec’s dividend to shareholders has been hiked at an average rate of 5.2% per annum since 2013. 

Usually, when a company’s share price declines in the face of rising profits, it’s a sign the business is issuing a lot of new shares, diluting existing shareholders, and pushing the price down. However, in this case, that’s not happening. Earnings per share have increased by 60% since 2014. 

I think this presents a fantastic opportunity for investors. After recent declines, shares in Investec are dealing at a forward P/E of 8, below the sector median of 13.

On top of the above, the stock supports a dividend yield of 5.8%. A return to the sector median multiple could imply a gain for shareholders of 63% combined with two years of dividend income, and you could be looking at a total return of nearly 100%.

In other words, Investec could be an excellent buy for value-seeking investors. 

A Growth Gem

Research into unloved sectors can often unearth fantastic growth opportunities to help boost your wealth – and one of Fool UK’s contributors believes they’ve identified one such winner, which could be a bona-fide bargain at recent levels!

To find out the name of this company, and to get the full research report absolutely free of charge, click here now.

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.