Sirius Minerals plc isn't the only growth stock I'd consider buying for my ISA

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Getting Sirius about potash

Sirius Minerals (LSE: SXX) has attracted a loyal shareholder following who view the stock as a long-term play that could help fund their retirement.

Although I share the view that this could become a great business, I'm not convinced the current share price reflects the 10-year plus timescale I believe will be required for the company to reach its full potential.

Crunching the numbers

Sirius has calculated a base case net present value (NPV) of $15.4bn for the Woodsmith mine. This represents the current value of lifetime profits from the mine, based on annual production of 20 million tonnes per annum (mtpa) of POLY4 fertiliser, forecast fertiliser prices and a number of other standard assumptions.

I estimate that at the current share price, the group's market-cap and net debt could total about $4.8bn by the end of 2018. This includes $3bn of stage 2 debt financing planned for this year, without which the project can't proceed.

$4.8bn is less than one third of the $15bn NPV, so you could argue the shares look cheap. But this valuation is based on annual production of 20mtpa. Sirius doesn't expect production to reach 10mtpa until 2024. Doubling this could take several more years.

In my view, Sirius could be a great long-term play. But I think the shares' discount is justified. I don't see any rush to buy.

One stock I would buy

It's a slightly different story at oil and gas firm Cairn Energy (LSE: CNE). The firm reported a return to profit this morning thanks to the recent start of production from its Catcher and Kraken fields in the North Sea.

The group expects related production to reach 17-20,000 barrels of oil per day (bopd), supporting forecast revenue of $434m in 2018.

Cairn's blockbuster SNE field -- off the coast of Senegal -- is now "fully appraised". An evaluation report is being prepared and an investment decision is expected by the end of the year. The firm, which has a 40% interest in SNE, expects to target initial production of 100,000 bopd.

A hidden opportunity

My calculations suggest that after today's results, Cairn shares trade at a 28% discount to their book value, excluding goodwill.

In my view, this represents a potential buying opportunity. Although profits are expected to be just $55m this year -- giving a forecast P/E of 33 -- the group has a number of oil fields due to start production over the next five years.

There's also a more immediate opportunity. Cairn is in arbitration to regain control of $1.2bn of financial assets currently stranded in India as the result of a tax dispute. The final hearing in this case is due in August, following which a ruling has been promised "as expeditiously as possible".

If Cairn can get access to even half of its India assets, I believe the shares could start to look very affordable at current levels. The shares aren't without risk, but I believe this could be a great stock to tuck away in an ISA and forget.

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Roland Head 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.

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