2 growth bargains for long-term investors

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IT infrastructure services provider Computacenter(LSE: CCC) continues to defy Brexit uncertainty by posting strong revenue growth for the third quarter of 2017.

Today's Q3 trading update showed overall revenues for the three months to 30 September up 27% to £931m, in spite of the weak business investment trends in the UK and the firm's shift away from low-margin product sales. Growth in its UK business continued to lag the group as a whole, with revenue in the quarter up just 8% to £335m, but that still represented an uptick from revenue growth of 5% in the first half of the year.

Looking ahead, the company is confident of hitting the full-year targets set out in its half-time results, which have already been upgraded twice this year. City analysts are similarly bullish, having raised their consensus earnings per share forecasts by 10% for 2017 and 5% for next year.

Tempting valuations

Although the shares are up 25% so far this year, the company still looks temptingly undervalued, with a forward price-to-earnings ratio of 16.7 and 16.4 on expected earnings for 2017 and 2018, respectively. These figures may not sound especially cheap, but given the company's impressive track record of delivering market-leading sales and profit growth, I believe Computacenter offers a genuine value opportunity.

Better still, the income prospects also look good as the group's net funds at the close of quarter rose from £54.5m a year ago, to £151.5m. Together with an attractive earnings outlook, this bodes very well for dividend growth going forward.

Long-term fundamentals

Elsewhere, online gaming and financial trading technology provider Playtech(LSE: PTEC) also seems to offer growth at a reasonable price.

Shares in the group have taken a tumble from all-time highs of more than £10, after its founder Teddy Sagi sold in June a larger than expected stake in the company in a move to diversify his investments. The market doesn't take too kindly to a founder wanting to sell, but ultimately it's the long-term fundamentals that determine returns over time.

Playtech is a leading software provider for the gaming industry and the outlook for growth seems compelling as bookmakers and new entrants vie for slices of the growing online market. Additionally, the group sees new market opportunities in the fast-expanding live gaming market and has invested in M&A to aid the development of new products and services.

Valuations

Looking ahead, City analysts have a 27% earnings per share rise on the cards for this year, with expectations of a further advance of 13% in 2018. These figures imply its shares trade at forward P/E multiples of as low as 12.6 and 11.5, respectively.

And combining these forecasts of earnings growth with its P/E multiples give us price-to-earnings growth (PEG) ratios of just 0.5 and 0.9 for 2017 and 2018, with a standard rule of thumb suggesting anything below 1.0 is considered to be a good value.

There are also tempting dividends to look forward to, with prospective yields of 3.6% and 4.1% for this year and next.

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Jack Tang 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.


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