2 value-growth stocks that could be too cheap to ignore

Shares in home shopping specialist Findel(LSE: FDL) are surging today after the company announced results for the full-year will be better than expected. 

Specifically, according to today's press release, management believes "performance is expected to be at the upper end of market expectations" thanks to "strong growth in customer numbers", particularly in the pre-Christmas trading period. 

Changes yielding results 

Today's update marks an impressive turnaround for Findel. Only this time last year, the company issued its second profit warning in two years and appointed a new chief executive, Phil Maudsley. 

It seems Maudsley is doing an excellent job. Even though trading was slower than expected during the fourth quarter of last year, due partly to "changes in marketing activity", the group benefited from stronger collections and recoveries from its credit receivables, which helped improve operating profit by 20% for the year as a whole. 

Meanwhile, sales declines at the Findel Education business have moderated. In the second half of last year, sales fell 2%, following a drop of 10% in the first half. Focus on the group's digital strategy now means around 50% of sales are coming through online channels "up sharply from c.18% at the start of the year.

And finally, the group ended the year with net debt of £74m, down by £7m from the previous year. 

Time to buy

So, what does the above mean for shareholders? Well, after the problems of the last few years, it looks as if Findel is now back on the track and if the firm can stay on its current trajectory, the shares could be too cheap to ignore at current levels. 

Indeed, at the time of writing, the stock is trading at a forward P/E of 10.7 and current City consensus is projecting earnings growth of 13% for the fiscal year ending March 2018. Based on today's release, it seems as if the company is set to beat this average estimate. Analysts are also forecasting earnings growth of 16% for 2019. 

In my opinion, this rate of growth deserves a mid-teens earnings multiple.

Too cheap to ignore? 

Another turnaround stock that appears to me to be undervalued is media group ST Ives(LSE: SIV)

For the past two years, the business has reported losses as its turnaround plan, to transform from a struggling publisher into a leading media group, has struggled to gain traction. However, it now looks as if management's efforts are beginning to pay off. 

At the beginning of March, the company reported an adjusted pre-tax profit of £12.7m, up 34% year-on-year thanks to lower operating costs and a 7% increase in revenues. 

City analysts and management are confident that this trend will continue. Earnings per share growth of 22% is predicted for fiscal 2018, the first significant growth in three years. Based on these targets, the shares are trading at a forward P/E of 6.4. 

Nonetheless, while ST Ives does look cheap, it's not without problems. The balance sheet is particularly weak. Intangibles account for around 50% of total assets. Stripping these assets out gives a negative shareholder equity value of -£50m, which leads me to conclude that the shares do deserve a low valuation, although a forward P/E of 6.4 seems too harsh. A multiple of 10 times earnings might be more appropriate, in my opinion. 

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Rupert Hargreaves owns no share 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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