I get nervous buying growth stocks after the market has been on a tear, because I fear overpaying at the top of the cycle. I’m happier when the market is down in the dumps, and there’s a chance of buying at the bottom.
This makes me nervous buying FTSE 100 growth stocks today, as the index breaks new all-time highs. Yet a number of stocks still look really good value, including these three.
Lloyds of London insurer Beazley (LSE: BEZ) looks super cheap trading at just 4.18 times trailing earnings. Especially with the FTSE 100 as a whole trading at 12.4 times.
Bargain shares
I expected to see dismal share price performance but in fact the Beazley share price is up 17.06% over the last three months, and 9.53% over the year.
Beazley got a real lift on 7 March, when it reported that full-year 2023 profits before tax jumped 155% to a record $1.25bn. Gross premiums have been climbing for years but there’s a key metric it has no control over, and that’s claims. Costs rocketed during the pandemic, for example, plunging Beazley to a loss.
Investors get a modest dividend, with the yield currently 2.23% a year, but the board recently agreed to a generous $325m share buyback programme. It’s a successful company going cheap, and I’m tempted to buy it.
Here’s a cheap growth stock I did buy recently: JD Sports Fashion (LSE: JD). I’d been standing on the sidelines for years, watching its shares grow and grow, but decided I’d left it too late to join the fun.
I spotted my chance on 4 January, when its shares crashed 20% after the board warned profits would be £125m lower than predicted after a poor festive trading period. I bought them on 22 January.
A trading update on 28 March suggested JD had stopped the rot, although the “challenging” market was still causing issues. My position is up a modest 4.38%. I think there’s still a buying opportunity here, with the JD Sports share price down 26.08% over 12 months.
The FTSE 100 is flying
The stock looks decent value, trading at 8.68 times trailing earnings. Sports and fashion retail is a tough market but with a five-year view, I’m optimistic.
Meanwhile, British Gas owner Centrica (LSE: CNA) is incredibly cheap trading at just 3.39 times earnings. That’s particularly surprising given that its shares have been going gangbusters, up 19.75% over 12 months and 142.83% over three years.
The Centrica share price got a real boost from the energy shock, but suffered as gas and oil prices retreated in 2023. Adjusted operating profits plunged from £3.3bn in 2022 to £2.72bn, a drop of 17.6%.
The board nonetheless hiked the dividend by 33% to 4p a share. Yet it’s not a super-high income stock, with a modest trailing yield of 2.99%. Centrica has warned that revenues will fall in 2024, based on the assumption that the oil price would continue to decline. That may change though. Much now depends on the Middle East.
JP Morgan recently highlighted how cheap Centrica is today. It reckons the group’s £1bn share buyback could be extended by a further £500m from the summer. We’ll see. Given the low valuation, I’m tempted to buy it today.
The post These 3 growth stocks still look dirt cheap despite the FTSE hitting all-time highs appeared first on The Motley Fool UK.
Should you buy Beazley Plc shares today?
Before you decide, please take a moment to review this first.
Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.
It’s called ‘5 Stocks for Trying to Build Wealth After 50’.
And it’s yours, free.
Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.
And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.
That’s why now could be an ideal time to secure this valuable investment research.
Mark’s ‘Foolish’ analysts have scoured the markets low and high.
This special report reveals 5 of his favourite long-term ‘Buys’.
Please, don’t make any big decisions before seeing them.
Claim your free copy now
More reading
A cheap stock to consider buying as the FTSE 100 hits all-time highs
Is the JD Sports share price set to explode?
Why is this value share getting even cheaper?
2 fantastic cheap shares investors should consider buying
With no savings at 40, I’d use Warren Buffett’s number one rule to build wealth
Harvey Jones has positions in JD Sports Fashion. 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.
