These FTSE 100 and FTSE 250 growth stocks are trading at rock-bottom prices right now. Here’s why I’ll be looking to add them to my own shares portfolio at the next opportunity.
Babcock International Group
Soaring defence spending means Babcock International‘s (LSE:BAB) earnings are forecast to rocket 111% this financial year (to March 2024). This means the company trades on an ultra-low price-to-earnings (P/E) ratio of 10.9 times.
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The business — which provides engineering and training services to air forces, navies and armies across the globe — enjoyed organic revenue growth of 18% in the first half. Meanwhile, underlying operating profit came in at a better-than-expected £154.4m. This was also up 27% year on year.
Weapons spending has rocketed in recent years as geopolitical stability has deteriorated. With the Ukraine war rolling on, tensions in the Middle East rising, and fears over Chinese expansionism on the up, demand from Babcock’s key customers is likely to keep growing strongly, too.
Just last month the company inked a £750m infrastructure contract with the Ministry of Defence to help it maintain the UK’s fleet of submarines. The FTSE 250 firm also has operations in Australasia, Canada, France and South Africa. It’s a broad footprint that helps to reduce risk.
On the downside, the growing importance of ethical, social, and governance (ESG) credentials among investors poses a threat to long-term share prices of defence companies. Last month, for instance, Aviva warned it will begin to phase out investment in weapons makers.
Yet on balance, I still believe the potential benefits of owning Babcock shares outweighs this threat. And particularly at current dirt cheap prices.
Coca-Cola HBC
Soft drinks bottler Coca-Cola Hellenic Bottling Company (LSE:CCH) is also expected to grow earnings strongly over the short term. A predicted 71% bottom line is tipped by City analysts for 2023. And a 9% increase is tipped for next year.
These bright forecasts illustrate how demand across its broad portfolio of drinks remains rock-solid even during challenging times. The company can afford to hike prices on its winning brands like Coca-Cola, Monster and Fanta without suffering a major loss of volumes.
In the last quarter organic revenues ripped 15.3% higher. It was a period when sales were driven by soaring demand for its energy beverages like Monster and coffee drinks including Costa. The company actually hiked its full-year earnings forecasts over the summer on the back of strong trading.
Today the firm’s shares trade on an undemanding forward P/E ratio of 12 times. I think this makes it a bargain given its excellent growth prospects.
Indeed, Coca-Cola HBC’s decision to launch a €400m, two-year share buyback programme in recent days underlines its superb profits outlook. This year the company has also increased its targets for annual organic revenue growth for beyond 2023 to a range of 6% of 7%.
I already own this Footsie share in my portfolio. And despite the threat poses by intense competition in its markets, I’m looking to increase my holdings in the new year.
