Buying shares in the two companies I'm looking at today would cost you 33% less than one year ago. That's right -- these 'growth' stocks have been big fallers.
But I believe at least one of these shares may now be too cheap to ignore.
A turnaround with legs?
Online advertising group RhythmOne (LSE: RTHM) is a tale of two parts. Formerly known as Blinkx, this business has reinvented itself and says that its RhythmOne advertising platform now ranks as number four in terms of global reach.
During the first half of the year, this translated into revenue of $114.5m, 72% higher than during the same period last year. The group also made some progress towards a return to profitability, generating adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of $3.1m.
Unfortunately this improvement wasn't enough to enable the group to become cash generative. Monday's half-year results showed an after-tax loss of $4.5m and an operating cash outflow of $3.7m, before changes in working capital.
This could be the answer
I mentioned that this was a tale of two parts. The second part of the RhythmOne story is the group's planned $185m acquisition of US rival YuMe Inc.
YuMe is a similar size business in terms of revenue and it operated profitably during the first half of 2017, generating a net profit of $5.6m on revenue of $79.3m. Crucially, RhythmOne's management believes it can make cost savings of $10m-$12m per year by combining the two businesses.
Based on today's half-year figures, I estimate that cost savings of this nature would be enough to make the combined business profitable at an after-tax level. City analysts covering the stock seem to agree. They expect RhythmOne to generate an adjusted net profit of $6.5m for the year to 31 March 2018, rising to $15m in 2018/19.
Although it's not without risk, I think the outlook for this firm is better than it has been for some years.
I think this stock could double
Shares of Hurricane Energy (LSE: HUR) have fallen by 6% from the 52-week high of 67p seen in May. In my opinion, it's hard to justify this fall. The company has done everything it promised to do and I believe Hurricane remains one of the most attractive North Sea oil stocks.
The group has 2P reserves and 2C resources of 523m barrels on the Lancaster licence, and recent discoveries suggest there could be similar-sized assets elsewhere in the group's portfolio. I believe there's a real possibility this could end up as a 1bn barrel company.
Since I last looked at Hurricane in September, the company has confirmed that it will go ahead with a plan to bring the Lancaster field into early production. First oil is expected in 2019 and the development is fully funded with cash and debt, without needing any external partners.
Planned production is 17,000 barrels of oil per day, which suggests to me that this company could be generating $300m-$400m of annualised revenue by the end of 2019. This isn't a conventional growth stock pick. But the firm's drilling results so far have all lived up to expectations, and chief executive Dr Robert Trice is highly respected in the industry.
In my view, Hurricane could be a profitable buy at under 30p.
A stock with 200% potential
I believe that both Hurricane and RhythmOne have the potential to double in size. But the Motley Fool's top analysts believe they've identified a stock that could triple in value.
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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 us better investors.