2 growth kings trading much too cheaply

I have long talked up the brilliant opportunities for earnings growth at On The Beach (LSE: OTB) and Thursday's full year trading statement has firmed up my faith even further.

The online holidays play advised that revenues rose 17% during the 12 months to September, in line with expectations, with sales in the second half rising by an impressive 26%.

On The Beach said that it "experienced significant growth for the majority of the key summer trading period, despite some softness in the weeks that followed the Barcelona terrorist attack in August and we have exited the financial year with strong forward momentum."

The Cheadle-based company's full year performance was impressive in both home and overseas markets. On foreign soil, On The Beach saw revenues leap 48% in the full fiscal year, with top-line growth revving up to 70% in the final six months of the period.

The strong performance in its international territories prompted chief executive Simon Cooper to comment: "We have continued to increase market share in our international markets and delivered strong revenue growth in the year [and] as a result of this performance, we are pleased to be launching in our third international market, Denmark, early in 2018."

Flying high

On The Beach is clearly a company on the move, helped by its recent acquisition of internet rival Sunshine.co.uk (without this unit, full-year sales would have grown by 14%). And the firm has plenty of cash in the bank to keep growing revenues either through organic investment or further M&A action.

The City is certainly predicting great things and earnings are anticipated to grow by an additional 28% in the current fiscal year. And this makes the business brilliant value for money.

Sure, a corresponding P/E multiple of 19.2 times is clearly not much to shout about. But a sub-1 PEG reading indicates that On The Beach is actually attractively priced relative to its growth prospects.

Boxing champ

Boxbuilder DS Smith (LSE: SMDS) is another earnings star I reckon is undervalued by the market right now.

In the year to April 2018, the London-based firm is expected to see profits expansion cool from the double-digit advances of recent years, and a 2% is rise predicted by City brokers. But this projection still creates an appetising forward P/E ratio of 14.7 times, below the widely-accepted value watermark of 15 times.

Besides, DS Smith is expected to regain momentum again from fiscal 2019, for which a 10% bottom-line rise is presently predicted.

And I am confident the business, which designs and manufactures packaging solutions for the fast moving consumer goods segment, has the tools to keep delivering meaty earnings rises thanks to its aggressive acquisition strategy.

Indeed, just this week DS Smith snapped up Romanian packaging and paper group EcoPack and EcoPaper for EUR208m to bolster its position in the vast growth markets of Eastern Europe still further. I am confident DS Smith could make you very decent returns on a shoestring.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended DS Smith. 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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