These 3 growth stocks still look dirt cheap despite the FTSE hitting all-time highs

Harvey Jones is hunting for growth stocks that have missed out on the recent FTSE 100 rally and still look good value. These three grab him.

| 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.

Young Caucasian woman with pink her studying from her laptop screen

Image source: Getty Images

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.

I get nervous buying growth stocks after the market has been on a tear, because I fear overpaying at the top of the cycle. I’m happier when the market is down in the dumps, and there’s a chance of buying at the bottom.

This makes me nervous buying FTSE 100 growth stocks today, as the index breaks new all-time highs. Yet a number of stocks still look really good value, including these three.

Lloyds of London insurer Beazley (LSE: BEZ) looks super cheap trading at just 4.18 times trailing earnings. Especially with the FTSE 100 as a whole trading at 12.4 times.

Bargain shares

I expected to see dismal share price performance but in fact the Beazley share price is up 17.06% over the last three months, and 9.53% over the year.

Created with Highcharts 11.4.3Beazley Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Beazley got a real lift on 7 March, when it reported that full-year 2023 profits before tax jumped 155% to a record $1.25bn. Gross premiums have been climbing for years but there’s a key metric it has no control over, and that’s claims. Costs rocketed during the pandemic, for example, plunging Beazley to a loss.

Investors get a modest dividend, with the yield currently 2.23% a year, but the board recently agreed to a generous $325m share buyback programme. It’s a successful company going cheap, and I’m tempted to buy it.

Here’s a cheap growth stock I did buy recently: JD Sports Fashion (LSE: JD). I’d been standing on the sidelines for years, watching its shares grow and grow, but decided I’d left it too late to join the fun. 

I spotted my chance on 4 January, when its shares crashed 20% after the board warned profits would be £125m lower than predicted after a poor festive trading period. I bought them on 22 January.

A trading update on 28 March suggested JD had stopped the rot, although the “challenging” market was still causing issues. My position is up a modest 4.38%. I think there’s still a buying opportunity here, with the JD Sports share price down 26.08% over 12 months.

The FTSE 100 is flying

The stock looks decent value, trading at 8.68 times trailing earnings. Sports and fashion retail is a tough market but with a five-year view, I’m optimistic.

Created with Highcharts 11.4.3JD Sports Fashion PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Meanwhile, British Gas owner Centrica (LSE: CNA) is incredibly cheap trading at just 3.39 times earnings. That’s particularly surprising given that its shares have been going gangbusters, up 19.75% over 12 months and 142.83% over three years.

Created with Highcharts 11.4.3Centrica Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The Centrica share price got a real boost from the energy shock, but suffered as gas and oil prices retreated in 2023. Adjusted operating profits plunged from £3.3bn in 2022 to £2.72bn, a drop of 17.6%.

The board nonetheless hiked the dividend by 33% to 4p a share. Yet it’s not a super-high income stock, with a modest trailing yield of 2.99%. Centrica has warned that revenues will fall in 2024, based on the assumption that the oil price would continue to decline. That may change though. Much now depends on the Middle East.

JP Morgan recently highlighted how cheap Centrica is today. It reckons the group’s £1bn share buyback could be extended by a further £500m from the summer. We’ll see. Given the low valuation, I’m tempted to buy it today.

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.

Harvey Jones has positions in JD Sports Fashion. 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

Here’s how Warren Buffett’s 2024 letter to shareholders can teach us to be better investors

The latest 2024 letter from Warren Buffett is a bit shorter than previous ones, but it's still packed with words…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Only 28% of Gen X are on track for a comfortable retirement! Could buying UK stocks help?

Looking for ways to supercharge your retirement fund? Investing in UK stocks is one path I think deserves serious consideration.

Read more »

Investing Articles

Here’s the 1 thing everyday FTSE investors have over billionaire fund managers

Our writer discusses a key advantage that retail FTSE investors with Stocks and Shares ISA accounts have in the stock…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Are Tesco shares the ultimate FTSE ‘Steady Eddie’?

Harvey Jones says watching Tesco shares climb steadily upwards is balm for the soul. But will the FTSE 100 grocer…

Read more »

Investing Articles

These 5 problems could hit the Barclays, NatWest, and Lloyds share prices in 2025!

The Barclays, NatWest, and Lloyds share prices have surged between 55% and 102% over the last 12 months. But could…

Read more »

Investing Articles

Up 18% in February! Should investors consider this for their Stocks and Shares ISA in March?

Harvey Jones wonders if soaraway FTSE 100 bank Standard Chartered would made a nice addition to a balanced Stocks and…

Read more »

Mature people enjoying time together during road trip
Investing For Beginners

Have money in a Cash ISA? Here are 3 reasons to consider investing in the stock market instead

History shows that over the long term, the stock market tends to deliver much better returns than the interest from…

Read more »

Investing Articles

What on earth is going on with the Nvidia share price lately?

The Nvidia share price has been all over the place in February. Does this tempt our writer to add the…

Read more »