After falling by as much as 8% from its January high, the FTSE 250 has started to deliver a comeback. Clearly, investors remain unsure about the near-term prospects for the UK and global economies. Brexit risks and the potential of a US-China trade war could mean that volatility remains high.
However, in such conditions there could be buying opportunities. Investing now may mean there are paper losses in the short run, but with a stock that released positive news on Wednesday appearing to offer good value for money, it could deliver high long-term returns.
Rising profitability
The company in question is recruitment specialist Pagegroup (LSE: PAGE). It released a first quarter update that showed a rise in gross profit of 12.3%, which made it a record quarter for the business. This was despite a challenging performance in the UK, where gross profit declined by 7.1% in what remains an uncertain period for the industry. However, with growth of 18.2% in the EMEA region, as well as growth of 18% in France and 28% in Germany, the overall picture for the business appears to be healthy.
The company’s diverse geographical spread means that it may be able to overcome further difficulties in the UK. With Brexit now less than a year away, businesses may be rather cautious when it comes to hiring new staff. Therefore, with exposure to fast-growing economies such as the US and China, the prospects for Pagegroup appear to be bright.
With the company forecast to post a rise in its bottom line of 14% in the current year, it has a price-to-earnings growth (PEG) ratio of just 1.4. This suggests that it may offer good value for money and could be worth buying right now.
Improving outlook
Also offering strong growth prospects is online takeaway marketplace Just Eat (LSE: JE). The company has a diverse geographical spread, with its recent update showing that it is becoming increasingly reliant on non-UK parts of its business for growth. This trend could continue as consumer confidence in the UK remains under pressure and the company may decide to focus its investment in other territories.
With Just Eat forecast to post a rise in its bottom line of 16% in the current year, followed by further growth of 32% next year, it seems to offer an encouraging outlook. The stock has a PEG ratio of 0.9 at the present time, and this compares favourably to many of its FTSE 100 peers.
With the company having a business model that appears to be resilient, it could be worthy of a much higher valuation. Although consumer spending in the UK may come under further pressure as Brexit fears mount, there may be a trend away from dining out and towards takeaways. Given the increasing popularity of using online marketplaces when it comes to takeaway ordering, Just Eat could be in a strong position to generate high and sustainable growth.
