Saga plc isn’t the only bargain growth stock I’d buy today

This stock could deliver strong growth alongside Saga plc (LON: SAGA).

| 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.

It’s been a difficult three months for investors in Saga (LSE: SAGA). The over-50s products and services specialist has seen its share price decline by around 36% during the period, with a disappointing financial performance the reason.

However looking ahead, the company appears to have turnaround potential. Certainly, it could take time for it to deliver improved share price performance. But it could be worth buying alongside another stock which also appears to offer growth at a reasonable price.

Strong performance

The company in question is the UK’s leading fishing tackle retailer Angling Direct (LSE: ANG). It reported a positive trading update on Friday which showed that revenue for the year to 31 January was ahead of expectations, up 44% versus the prior year. It performed well across its retail and e-commerce divisions, with investment in its online platform and operations resulting in a 54% rise in direct sales.

Clearly, there is uncertainty facing the company. Structural changes in retail buying habits and weakness in the UK consumer outlook could result in greater competition. However, the company remains upbeat about its prospects, with its strong competitive position and the prospect of continued investment both having the potential to aid future performance.

Looking ahead, Angling Direct is expected to report a rise in its bottom line of 63% in the current year. Despite this, it has a price-to-earnings growth (PEG) ratio of just 0.5, which suggests that it may be undervalued at present. With a relatively loyal customer base and a dominant position in what remains a large industry, the company could be a worthwhile buy for the long run.

Return to growth

Of course, the outlook for Saga is still relatively uncertain. The company is due to report a 2% decline in earnings for the current year as it makes significant changes to its management structure and strategy following a disappointing period. But this is expected to have a positive impact on its financial performance, with earnings growth of 2% forecast for next year.

As such, it appears as though the company could take time to return to its previous rate of growth. In the long run though, that looks very achievable. Demand for a range of services among the over-50s is likely to remain buoyant, with an ageing population having the potential to create a tailwind for the company. And with Saga trading on a price-to-earnings (P/E) ratio of 8.9, it seems to offer a wide margin of safety. This could mean that it’s able to offer high capital growth potential in the long run.

The company also has a relatively high dividend yield as well. Following its share price fall, it stands at 7.7% and is covered 1.5 times by profit. This suggests that it’s not only highly sustainable, but could increase in future.

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 in Saga. 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

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

14.5bn reasons why I think the Legal & General share price is at least 11% undervalued

According to our writer, the Legal & General share price doesn’t appear to reflect the underlying profitability of the business. 

Read more »

Young black man looking at phone while on the London Overground
Value Shares

After a 16% drop, FTSE 100 stock JD Sports Fashion looks like a steal to me

This FTSE 100 stock has tanked since mid-September. Edward Sheldon believes that there's value on offer after the share price…

Read more »