Shares of Carr's Group(LSE: CARR) are trading 2.8% lower today at 142p after the company released results for its financial year ended 2 September. As the agricultural and engineering group had previously flagged, profits dipped due to soft demand for feed blocks in the US and a major contract delay in its UK engineering business.
Despite occasional profit lumpiness from factors beyond its control, this FTSE SmallCap firm, which is valued at £130m, has nevertheless delivered an impressive annualised total return for shareholders of 12.9% over the last 10 years (compared, for example, with 11.7% from blue-chip luminary Unilever).
After a challenging year, the 2018 outlook for Carr's is considerably brighter. In its agricultural division, a recovery in the US started in H2 and improved farmer confidence is evident in the UK. Meanwhile in engineering, the delayed major contract has come through and with the group's August acquisition of NuVision Engineering also providing a good foothold in US nuclear markets, strong top- and bottom-line growth is forecast.
The analyst at Edison, which counts Carr's as a client, has upped her normalised earnings per share (EPS) forecast from 11.6p to 12.5p, representing 33% growth on 2017's depressed EPS. This forecast puts Carr's on an undemanding price-to-earnings (P/E) ratio of 11.4 and a price-to-earnings growth (PEG) ratio of 0.35, which is deeply on the 'value' side of the PEG 'fair value' marker of one.
A forecast well-covered dividend of 4.2p, giving a yield of close to 3%, adds to the value on offer and I rate the stock a 'buy'.
Also offering great-value growth, in my view, is AIM-listed but long-established M. P. Evans Group(LSE: MPE). At a share price of 820p, this palm oil producer from plantations in Indonesia is valued at £450m.
You'll probably recall that the market re-evaluated Unilver's shares after the Anglo-Dutch group rejected a bid from Warren Buffett-backed Kraft Heinz earlier this year. A similar thing happened with M. P. Evans. The value of the London-listed company was markedly lower than that afforded similar firms listed in Asia and a bid came in from a Malaysian conglomerate at 640p a share, followed by an improved offer of 740p. The board, backed by major shareholders, rejected the offer, saying it "very substantially" undervalued the company.
While the shares are now up to 820p, I believe M. P. Evans remains undervalued. For one thing, an independent assessment of its assets, which it commissioned at the time of the bid, gave its equity an implied value of 1,082p a share. For another, the current price looks to markedly undervalue the EPS growth in the offing. The consensus forecast is for a 39% increase to 31 cents (23.7p at current exchange rates), followed by a 52% rise to 47 cents (35.9p) for 2018. This gives a P/E of 34.6, falling to 22.8 and an attractive 2017/18 PEG of 0.44.
With additional value from a running dividend yield of 2.2% (excluding special dividends) and the board committed to paying "enhanced dividends," this is another growth stock that looks very buyable to my eye.
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. 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.