2 top value Footsie stocks I'd buy right now

Finding shares that offer a mix of value, growth and dividend potential can be difficult. After all, such companies often become increasingly popular among investors, and this can lead to their margins of safety being squeezed.

Following the Footsie's recent bull run, finding such stocks could prove to be even more challenging, with valuations being close to record levels. However, here are two stocks that could offer significant total return potential in the long run.

Improving performance

Reporting on Thursday was support services company Serco(LSE: SRP). The performance of the business in 2017 was relatively impressive, with it able to deliver profitability at the top end of previous expectations. Although sales and profitability were lower versus the prior year, the overall performance of the business in a difficult market was upbeat. This allowed it to reduce net debt to lower levels than had been expected, which could help to improve the sustainability of the business.

The strategy employed by Serco appears to be having a positive impact on its performance. Also providing it with growth potential is its international focus, with the performance of the UK public outsourcing industry coming under pressure during the year. Despite this, the company continues to see opportunities for growth in domestic and international markets in the long run.

Looking ahead, the stock is forecast to post a fall in earnings of 1% this year. However, it is expected to follow this up with growth of 42% next year. The company's price-to-earnings growth (PEG) ratio of 0.4 indicates that investors have not fully priced in its growth potential. And with dividends due to rise by 150% next year after commencing again this year, the income potential for the stock also appears to be enticing.

Successful turnaround

Also expected to deliver a strong recovery over the next couple of years is fellow support services company G4S(LSE: GFS). It also experienced challenges in recent years, with legacy issues contributing to a fall in profitability. However, under its current strategy it appears to be delivering on its potential, with it returning to positive earnings growth in 2016.

The stock is expected to report a rise in its bottom line of 9% in both of the next two financial years. This puts it on a PEG ratio of just 1.3, which suggests that it offers a wide margin of safety. Certainly, a margin of safety of some sort is understandable, given the difficulties experienced in the UK outsourcing sector in recent months. But such a low valuation at a time when the investment outlook for the wider index is positive could suggest that there is upside potential on offer.

Additionally, G4S has a dividend yield of 3.9% from a payout that is covered almost twice by profit. As such, it could become an even more attractive income play - especially with its financial outlook being relatively positive.

5 Footsie shares with high return potential?

Of course, there are other stocks that could be worth buying at the present time. With that in mind, the analysts at The Motley Fool have written a free and without-obligation guide called Five Shares You Can Retire On.

The five companies in question offer a mix of income, growth and value potential. They could outperform the index and boost your portfolio returns in 2018 and beyond.

Click here to find out all about them - it's completely free and without obligation to do so.

Peter Stephens has no position in any 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.