These FTSE 250 growth stocks still look cheap

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Wizz Air

Back in February, I chose FTSE 250 airline group Wizz Air Holdings (LSE: WIZZ) as my stock of the month. The shares have since climbed 47% to a new record high, thanks to continued strong trading.

Budget airlines appear to be able to tap into almost unlimited demand for cheap flights at the moment. The risk for investors is that in doing so their profit margins will collapse. That doesn't seem to have happened yet at Central and Eastern Europe-focused Wizz Air.

Today's first-quarter figures show that passenger numbers rose by 25.2% to 7.2m during the three months to 30 June, compared to the same period last year.

Revenue was 28.6% higher, and underlying net profit was 50% higher, at EUR58.4m. This lifted the group's post-tax profit margin by 1.8% to 12.4%, which is fairly impressive.

This sharp rise in profits is partly the result of rapid expansion. But the airline is also delivering incremental gains elsewhere to boost profits. Revenue per available seat kilometre (ASK) rose by 3.4% during the quarter, outpacing a 2.1% increase in total costs per ASK. Ancillary revenues per passenger -- optional extras which carry high profit margins -- rose by EUR1.80 to EUR28.20 per passenger.

Today's update indicates that management expects to maintain this level of profit for the remainder of the current year. Full-year net profit is expected to be "towards the top end of the range" of guidance for EUR250m-EUR270m.

Wizz Air shares traded flat when markets opened this morning. This leaves the group on a forecast P/E of 14.1 for the current year. Given the current rate of growth, I'd argue that the shares remain a buy.

Why is this stock so cheap?

Shares of iron ore pellet producer Ferrexpo (LSE: FXPO) have risen by 475% over the last year. However, despite this four-bagging performance, I believe the stock still has the potential to deliver further gains.

Production during the first half of this year was lower than last year, due to scheduled maintenance. But analysts expect the group's adjusted net profit to rise by 59% to $322.5m this time, up from $189m.

A gain of this size is possible because the firm's costs are expected to remain low, while iron ore prices have risen. Ferrexpo currently trades on a 2017 forecast P/E of just 5.4, with a prospective yield of 2.4%.

Is it too cheap?

The price tag is tempting, but there are some risks involved. Mining analysts expect profits across the iron ore sector to fall next year. Forecasts for Ferrexpo suggest 2018 earnings could fall by 39%, putting the stock on a P/E of 8.9.

Another risk is that 50.3% of the firm's stock is controlled by the firm's chief executive, Ukrainian billionaire Konstyantin Zhevago. This close control means that minority shareholders are unlikely to have much influence on how the group is managed.

Ferrexpo probably isn't the safest way to invest in the mining sector. But the company's operations are low cost and generate a lot of cash. I believe the firm's shares could still be a decent buy at current levels.

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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