2 growth stocks for in-the-know investors

With the FTSE 100 having fallen heavily in recent months, buying shares may not seem like a great idea. After all, many investors may now have portfolios that are worth less than they were at the end of 2017.

However, buying on dips is a popular strategy which can work out well in the long run. While it may mean paper losses in the near term, it can lead to wider margins of safety being found for the long run. And with that in mind, here are two shares which appear to be worth buying right now.

Mixed performance

Reporting its first quarter trading update on Friday was performance materials company Low & Bonar (LSE: LWB). The company's performance was mixed in the first part of the year, with revenue increasing despite challenging market conditions in Europe and the US. Raw material costs have had a negative impact on the company's financial performance, while there was an unfavourable product mix.

Looking ahead, the company remains on track to meet its guidance for the full year. But it expects there to be a significant second-half weighting as it seeks to mitigate higher input costs through rising selling prices. As such, investor sentiment has declined, with the company's shares falling by around 6% following the update.

However, with Low & Bonar still on track to deliver earnings growth of 5% in the current year, followed by further growth of 7% next year, it seems to be in a strong position to generate a rising share price. It trades on a price-to-earnings growth (PEG) ratio of just 1.2, which suggests that it could offer significant upside potential in the long run.

Low valuation

Also offering capital growth potential within the industrials sector is aerospace and defence company Rolls-Royce(LSE: RR). It has experienced a challenging number of years, with its profitability coming under pressure due to a weak strategy and difficult trading conditions.

Now though, it has a refreshed strategy which seems to be working well, while the outlook for the defence industry in particular has improved significantly. A mixture of cost cutting and increased spending on the military by the US and other developed nations could help Rolls-Royce to deliver an improving bottom line. And with it trading on a PEG ratio of just 0.4, it seems to offer excellent value for money.

Certainly, the company faces risks from a slowing global growth outlook. The last few months have shown that global companies could be severely affected by geopolitical risks, as well as problems such as a potential trade war between the US and China and the impact of rising interest rates. But with a sound management team now in place and a strategy which is simple and yet possibly highly effective, the stock appears to have a solid growth outlook for the long run.

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Peter Stephens owns shares of Rolls-Royce. 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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