2 bargain basement growth stocks I’d buy in May

These two shares appear to be undervalued given their outlooks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Finding dirt-cheap stocks is never a particularly easy task. Markets tend to be relatively efficient and so the forecasts for all stocks tend to be priced-in to their valuations. However, there are occasions where opportunities exist to buy shares with high growth prospects at low prices. Here are two prime examples which could be worthy of a closer look.

Favourable trading conditions

Friday’s update from wealth manager Charles Stanley (LSE: CAY) showed that it is making encouraging progress in favourable operating conditions. Funds under management and administration increased by 5.7% versus the end of 2016, and were 17.1% higher than a year prior. Growth was also seen in the company’s discretionary and execution-only funds, which rose by 21.3% and 23.5% respectively when compared to a year ago. And while advisory dealing funds saw modest growth of 5.9%, the company’s overall performance has been upbeat.

Clearly, Charles Stanley has benefitted from favourable trading conditions. Share prices across the globe have enjoyed one of their best starts to a calendar year in some time. Now though, the outlook is changing and there is a reasonable chance that further share price falls could be ahead. As such, the forecast growth rate in the company’s bottom line of 74% this year and 37% next year could be downgraded if operating conditions deteriorate.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Despite this, the company seems to be a worthwhile investment at the present time. It has a price-to-earnings growth (PEG) ratio of just 0.2, which indicates that it offers a wide margin of safety. Therefore, even if the favourable operating conditions of recent months fade in future, its share price could still rise.

Upbeat outlook

Also offering high growth potential at a very reasonable price is diversified financial services company Standard Life (LSE: SL). It is expected to record a rise in its earnings of 57% this year, followed by further growth of 7% next year. As well as high growth, it also offers a range of products and services and operates in a number of geographies. This could reduce its overall risk profile and lead to a more robust earnings profile in the long run.

Despite this upbeat outlook, Standard Life trades on a PEG ratio of just 1.7. This indicates that its share price could rise significantly and still leave it trading at fair value. Given the uncertainty in global financial markets, such a wide margin of safety could prove to be a useful ally for long-term investors.

As well as a low valuation and high growth prospects, Standard Life also has strong dividend growth potential. It currently yields 5.9% from a dividend which is covered 1.4 times by profit. This suggests a sustained rise in dividends could lie ahead, which may cause the company’s shares to become increasingly popular at a time when inflation is edging higher.

British CEO gobbles up £238,000 of own stock

What company does he run?

And why is he so confident in its long-term potential?

This new report - ‘One Top Growth Stock from The Motley Fool’ - reveals the full details, both risks and opportunities. Some of which you may find frankly, unbelievable.

Though past performance does not guarantee future results, over the past 5 years, it’s seen consistent:

  • Double-digit revenue growth
  • Returns on capital almost 600% the UK average
  • Now, profits are exploding again - up 46% in 1 year!

It’s no wonder insiders are buying this stock hand over fist. Last year, they bought a total £492,000 of shares. And now might be the ideal moment to join them.

So please, don’t miss this report, ‘One Top Growth Stock from The Motley Fool’ Including both risks and opportunities.

Secure your FREE copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Standard Life. 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.

More on Investing Articles

Investing Articles

The S&P 500’s 12% off its highs. Is now a good time to buy US shares for an ISA?

Right now, a lot of British investors are wondering whether it’s a good time to buy US shares. Here, Edward…

Read more »

Investing Articles

2 stocks that could help investors earn £2,516 of passive income per year from a £20k ISA

Our writer selects two high-yield UK dividend shares for investors to consider that could turbocharge a passive income portfolio.

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Why I think FTSE 100 dividend shares could build a better second income than the S&P 500

US tech stocks are hot, but when aiming for a sustainable second income later in life, our writer prefers dividend-paying…

Read more »

Investing Articles

2 blue-chip FTSE 100 shares Hargreaves Lansdown investors have been buying in the market sell-off

When global markets were in meltdown mode, Hargreaves Lansdown investors recently piled into these two well-known FTSE 100 names.

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Investors considering £10,000 of Sainsbury’s shares could one day make £2,590 a year in dividend income!

Sainsbury’s shares deliver a yield significantly over the FTSE 100’s 3.8% average and they also look very undervalued against their…

Read more »

Trader on video call from his home office
Investing Articles

After a 12% drop in a month, is it finally worth me buying this rare FTSE technology stock?

A scarcity of technology shares in the FTSE 100 pushed the prices of many beyond their fair value, I think.…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

How can I protect my 2025 Stocks and Shares ISA against tariff war pain?

Just when we were looking forward to a new Stocks and Shares ISA allowance for 2025-26, the world is thrust…

Read more »

Mature black couple enjoying shopping together in UK high street
Investing Articles

As WH Smith shares rise despite its H1 loss, I still think they’re good value

Shares in retail companies have been having a tough time recently, but does the latest FTSE 250 stock to report…

Read more »