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Investing in growth stocks can bring amazing returns over time. If earnings rise as analysts expect, shareholders could enjoy price gains that break the industry average.
Buying them cheap can leave room for even higher returns. The theory is that there is an opportunity for the market to realize this value over time, and the process drives their prices higher.
There is another benefit to buying growth stocks at a low price. These stocks can be very sensitive to price fluctuations. Undervalued companies, however, come with “margin of safety” which can protect against any sharp price reversal.
With this in mind, here are two of my favorite, inexpensive ones FTSE 100 shares this month. I believe they deserve more research at this point.
Standard Chartered
Investing in emerging markets such as Standard Chartered (LSE:STAN) can be uncomfortable at times. Political and economic instability can harm its profit growth, as it can cause sharp exchange rate movements.
However the benefits of investing can still outweigh these potential risks. For example, I think investors should consider buying its shares, despite the current problems in China.
First, it is my opinion that China’s problems are traced to low bank rates. It trades at a forward price-to-earnings (P/E) ratio of 7.1 times. On top of this, its corresponding price-to-earnings (PEG) multiple is 0.1. A reading below 1 indicates a limited supply.
Second, I think the long-term investment bank issue is still valid. Demand for banking products in its Asian and African markets is expected to continue to increase over the next decade. This is likely to be driven by rising levels of human wealth and rapid population growth.
Meanwhile, City analysts expect StanChart’s earnings to grow 86% year-over-year through 2024. A 12% increase is predicted for next year as well.
The Sage Group
on paper, The Sage Group (LSE:SGE) doesn’t look cheap. Its forward P/E ratio is 27.1 times, a high ratio that could see its shares fall if market sentiment deteriorates.
This is possible if the probability of a recession in the US increases.
That said, I think the software giant deserves a closer look following recent price weakness. Its shares have fallen by about a fifth in the past six months.
Sage has great growth potential, in my book. Its cloud-based accounting products are growing in popularity as firms transform their business processes. Marketing is benefiting from a broader digital approach to the way companies do business.
I also love the great strides Sage has made in artificial intelligence (AI) since launching the Pegg chatbot in 2016. CEO Steve Hare says AI will “change the environment” of accounting, and is increasing the product launch in this area.
City analysts expect Sage’s annual revenue to rise 13% this fiscal year (until September 2025), and next year. I think it looks more attractive than smart than many other US tech stocks, and especially those with AI exposure.
Nvidia again Microsoftfor example, they trade at forward P/E ratios of 47.6 and 31.6 times, respectively.
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