2 monster growth stocks at deep-value prices
With the FTSE 100 having experienced a correction in recent months, there appear to be a number of growth stocks trading on enticing valuations. Certainly, there is scope for a further decline in the wider index. Investor sentiment appears to be weaker than it has been for many months, and this could prompt a further plunge towards a bear market.
However, for long-term investors, there appears to be a buying opportunity on offer right now. With that in mind, here are two shares that could be worth buying for the long run.
Reporting on Wednesday was temporary physical structure, seating, ice rink and furniture provider Arena Events(LSE: ARE). The company enjoyed a relatively prosperous 2017, with its revenue increasing by 18% to £109.6m. This enabled adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to rise by 25% to £10.6m, with the company's return on capital employed surging to 8.3% from 4.2% in the previous year.
The business made significant progress during the 2017 financial year. It was able to deliver a number of major contracts which could have a positive impact on its financial figures in future, while the acquisition of Wernick seating and mass participation sports business could act as a positive catalyst on its performance.
Looking ahead, Arena Events is forecast to post a rise in its bottom line of 30% in the current year, followed by further growth of 25% next year. Despite this, it has a price-to-earnings growth (PEG) ratio of just 0.4, which suggests that it could offer a wide margin of safety. While its prospects could be viewed as relatively high risk due in part to its small size, it appears to have a sound business model and strong momentum. As such, buying it now could be a shrewd move.
Also offering growth at a reasonable price is consumer goods company, Unilever(LSE: ULVR). It has delivered two consecutive years of double-digit growth in its bottom line, and is expected to post a rise in net profit of 5% this year and 10% in the following year. As such, it could be viewed as a relatively reliable growth stock which has a diverse business model that could perform well in more challenging trading conditions.
Since Unilever has focused on building its business in the developing world in the last decade, it now generates the majority of its sales from emerging markets. Given the longevity of growth which could be on offer in such regions, the stock appears to have a dependable growth outlook for the long run. Therefore, it could be worthy of a premium valuation due to what may prove to be a strong risk/reward ratio.
However, with Unilever trading on a PEG ratio of 1.9, it seems to offer significant upside potential. It could perform well even in volatile market conditions, with the recent fall in the FTSE 100 suggesting there may be a buying opportunity on offer.
Peter Stephens owns shares of Unilever. 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.