The FTSE 250 is full of exciting growth stocks. Every so often, I search the index for companies that appear to be undervalued based on price-to-earnings (P/E) ratios. Having now found two such firms, I want to know if I should add them to my portfolio. Could these bargain stocks really provide me with long-term growth? Let’s take a closer look.
Bargain #1: Plus500
The first company is Plus500 (LSE:PLUS), an online trading platform. It currently trades at 1,577p. It has trailing and forward P/E ratios of 6.05 and 7.44, respectively.
These ratios are found by dividing the share price by earnings, or forecast earnings in the case of forward P/E ratios. They indicate if a business is under- or overvalued.
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By comparing these ratios with a major competitor, CMC Markets, it appears that Plus500 could be a bargain at current levels.
CMC has higher trailing and forward P/E ratios of 8.38 and 11.05, which indicates that Plus500 may be undervalued.
Beyond valuation metrics, Plus500 is enjoying favourable trading conditions. It has benefited from recent market volatility and expects its 2022 revenue and underlying earnings to be “significantly ahead” of expectations.
What’s more, for the three months to 31 March, its income increased by 68% and it also recently announced a $50m share buyback scheme.
In essence, this share buyback scheme is simply a way for the company to return cash to shareholders and an indication that the business is healthy.
However, it is possible that the firm may be unable to maintain its strong recent results if issues causing market volatility, like the pandemic and the war in Ukraine, come to an end.
Bargain #2: Jupiter Fund Management
The second firm is Jupiter Fund Management (LSE:JUP), an asset manager. It has forward and trailing P/E ratios of 6.3 and 9.54. These are lower than a competitor in the asset management industry, Ashmore.
Ashmore, an emerging-markets-focused asset manager, has higher forward and trailing P/E ratios of 7.78 and 10.96. Like Plus500, this is an indication that Jupiter may be undervalued at current levels. At the time of writing, it’s trading at 175.5p.
The company has also demonstrated resilience, bouncing back from a difficult pandemic period. In 2020, for instance, profit before tax fell by £20m to £132m. The following year, however, it posted a pre-tax profit of £183m.
Over 2021, the business also increased assets under management by 3%. This was positive news, given that Ashmore’s assets under management declined during that time.
However, Jupiter still had a net outflow of £3.8bn. Although this was down from £4bn in 2020, it still means that client money is leaving this asset manager.
Overall, I feel both of these companies, Plus500 and Jupiter Fund Management, provide exciting opportunities to add undervalued stocks to my long-term portfolio. By getting a bargain, I can better position myself for growth over an extended period of time. I will be buying shares in both businesses soon.
