2 growth stocks trading at deep-value prices

These two stocks appear to offer wide margins of safety.

| 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.

With the stock market having fallen in recent months, there could be buying opportunities on offer. Certainly, the prospects for the world economy may remain upbeat, but investors are now more cautious about the outlook for inflation and interest rate rises. As such, further falls in stock market levels cannot be ruled out.

For long-term investors, this could represent a buying opportunity. With that in mind, here are two shares which could deliver improving share price performance due to their low valuations.

Changing business

Reporting on Monday was oil and gas engineering services business Plexus (LSE: POS). The company reported its interim results, which showed that it is experiencing a period of major transition. The business has been through a period of low activity levels in recent years, and this has put significant pressure on its financial performance.

In the six months to 31 December, those difficulties continued. As such, dividends remain suspended and the near-term prospects for the company appear to be challenging. For example, in the current financial year it is expected to record a net loss for the third consecutive year.

However, Plexus could have recovery potential. The company recently sold its jack-up exploration application business, and this may provide it with the capital to focus on other areas that could offer strong growth. And with the oil price having risen, activity levels across the oil and gas industry could increase.

Certainly, the stock is high risk at the present time. Its share price could be volatile and come under pressure. However, with the potential for growth across the industry and its shares now being priced at 75% less than they were five years ago, a turnaround opportunity could be on offer.

Improving outlook

Also offering growth potential within the oil and gas sector is Wood Group (LSE: WG). The energy services company has experienced a difficult period, with its bottom line falling in each of the last two years. This has been at least partly due to the lower oil price which has caused oil producers to cut back on exploration spending.

However, Wood Group has been able to capitalise on lower valuations across the industry via its combination with Amec Foster Wheeler. This could provide it with a stronger foundation for growth and lead to a more robust outlook for the business. And with its bottom line due to return to positive growth in the current year, its prospects appear to be improving.

Looking ahead, Wood Group is expected to report a rise in its bottom line of 23% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.5, which suggests that it offers a wide margin of safety. Therefore, with the prospects for the oil and gas industry on the up, now could be the perfect time to buy it for the long run.

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 has no position in any of the shares mentioned. 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

10%+ dividend growth! 2 FTSE 250 shares tipped to turbocharge dividends

These FTSE 250 income shares look in great shape to grow their dividends by double-digit percentages, says our writer Royston…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

Would it be madness to buy this FTSE stock smashed by Donald Trump’s team picks?

Ben McPoland takes a look at one FTSE share inside his portfolio that has been battered lately due to a…

Read more »

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

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 »