Unsurprisingly, these problems have prompted investors to sell up and move away from the business. Since the beginning of May last year, the stock has fallen by around 44% and now trades at a P/E of just 11 compared to its historical average of approximately 25.

Trying times 

As my colleague Paul Summers recently pointed out, after these declines, the stock does look attractive compared to its historical valuation, and I am inclined to agree. It’s notable that while profits took a hit last year, revenues continue to expand, which shows consumers are still drawn to Ted Baker’s offering.

With this being the case, I think it might be worth taking a punt on the business today. The fact that sales are still growing suggests that the market may have overreacted to recent bad news and it could be worth taking advantage of the low share price. On top of the discount valuation, the stock also supports a dividend yield of 4.6%, so investors will be paid to wait for any turnaround.

As well as Ted Baker, I think global advertising giant WPP (LSE: WPP) is also worth investing in as a turnaround opportunity.

Double your money 

Ted Baker and WPP have a lot in common. Both companies have lost their CEOs due to allegations of misconduct, and both have reported struggling growth due to challenging market trends.

WPP reported an 18% decline in earnings per share for 2018 and City analysts don’t expect the drop to stop there. They’ve pencilled in a further slump of 12% for 2019. However, even after this contraction, the company is still set to earn 102p for 2020 according to current projections, which puts the stock on a forward P/E of 8.5.

I think this multiple undervalues this global advertising giant. Even though it has fallen on hard times recently, the company remains the largest advertising group in the world and I reckon it will only be a matter of time before growth returns.

Management is trying to attract customers back to the group with its all-encompassing offering, which means it can offer a range of services most other providers cannot. I firmly believe that over the long term, WPP’s size and experience will help the company pull through and, when it does, the stock could be worth almost double what it is today as the shares have historically changed hands for around 15 times earnings.

As well as the low valuation, shares in WPP also yield 6.9% so, once again, investors will be paid to wait for the turnaround. 

The post Looking for blue-chip income? Two 5%+ yielders I’d buy with £2k today appeared first on The Motley Fool UK.

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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.

Unique position for growth 

Today’s results also showcase its unique position. Group sales for the period from 1 July to 31 October 2017 grew 2% year-on-year, driven by a strong performance in the industrial division, which saw sales expand 5%. Excluding the US crafts business, overall reported sales grew 5-6%. Reported crafts revenue declined 12% during the period. 

Despite those headwinds in the craft division, management still expects the firm to hit City earnings targets for the year. Analysts are projecting earnings per share of 4.9 for the full-year, putting the company on a forward P/E of 17.7. While this multiple might seem expensive, I believe it undervalues the business for two reasons. 

Firstly, Coats dominates its market and second, the business generates a return on capital employed — a measure of how much profit the company produces for each £1 invested — of 30%-plus. Only a handful of business are this productive. Indeed, this ratio indicates that the company’s book value will double every 2.5 years and if management doesn’t decide to reinvest, shareholders will benefit. 

At present, the shares only yield 1.4%, but the payout is covered four times by earnings leaving plenty of room for further growth. 

Coats is undoubtedly one company I want to keep an eye on.

Growing in a hostile environment 

As well as Coats, I’m highly optimistic about the outlook for Ted Baker (LSE: TED). Over the past five years, shares in the fashion and lifestyle retailer have risen 170% as the company has defied the broader retail sector woes. And it’s showing no signs of slowing down. 

According to the firm’s latest trading update, revenue rose 7.3% year-on-year for the 13 week period from August 13 to November 11, despite “challenging” trading conditions. Total retail sales jumped 19% mostly thanks to a 30% rise in online sales and 14% increase in wholesale revenues. 

Ted Baker now anticipates low double-digit wholesale sales for the full-year having said in July it was expecting to achieve high single-digit growth. 

Bucking the trend 

At a time when the majority of the UK retail sector, especially in fashion, is struggling, the fact that Ted continues to report double-digit sales growth is a testament to its customer appeal and business model.

Although its shares might not be cheap, I believe that there’s still room for further growth in the years ahead. Based on analyst projections, the shares trade at a forward P/E of 21.2 for the year ending 31 January 2018 and yield 2%. The payout is covered twice by earnings per share, and annual double-digit earnings per share growth is projected for the foreseeable future. 

The post These ‘secret’ growth & dividend stocks could still help you retire rich appeared first on The Motley Fool UK.

More reading

• What can we learn from Warren Buffett about investing for retirement?
• 1 major investing mistake that can drain your Stocks and Shares ISA
• £20,000 invested in these penny shares 5 years ago is now worth £42,260!
• I’m getting ready for an AI-driven stock market crash
• How much would an ISA need to bridge the gap between the State Pension and £38,584 a year?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Ted Baker plc. 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.