2 bargain stocks you probably haven’t considered

A basket of Premier Foods brand groceries.

Finding the best shares trading at the lowest prices can be tough. Even keeping track of stocks within a particular index or sector can be time consuming. As such, it is perhaps inevitable that a number of stocks will slip through the fingers of even the keenest of investors, with missed opportunities being the end result. With that in mind, here are two companies which could have been missed by many investors, but that could provide significant capital growth prospects.

Low valuation

Reporting on Thursday was food and beverage manufacturer Premier Foods (LSE: PFD). The company reported a quarterly update which was generally in line with expectations. Sales in the first quarter of the year were 3.1% lower than in the same quarter of the previous year, although the business has managed to deliver market share gains in Grocery and Sweet Treats. It has been able to do so despite a competitive environment, with the company recording outperformance relative to its industry peers.

Encouragingly, Premier Foods reported a rise in international sales of 20%, which is its 11th successive quarter of growth. The first new products from the Nissin strategic relationship have now delivered over £3m of retail sales, while the company’s expectations for the full year remain unchanged.

Looking ahead, Premier Foods is expected to report a rise in its bottom line of 9% this year, followed by further growth of 5% next year. This puts it on a price-to-earnings growth (PEG) ratio of just one, due in part to a single-digit price-to-earnings (P/E) ratio. Clearly, the company is not particularly popular among investors at the present time. This could present a buying opportunity for long term investors seeking a wide margin of safety.

Improving outlook

Also offering capital growth potential within the consumer goods sector is PZ Cussons (LSE: PZC). The diversified consumer products business has endured a rather challenging period in recent years, with its key Nigerian market experiencing economic difficulties. This has negatively impacted on demand for the company’s products and caused a pullback in its financial performance.

While the situation in Nigeria is not fully recovered from an economic standpoint, the country nevertheless provides a stunning growth opportunity for the business. Rising wealth could lead to higher demand for premium consumer products such as those sold by PZ Cussons. And with the rest of its business performing well after a number of successful product launches, it continues to offer upside potential.

Although the company’s bottom line is forecast to rise by just 6% in each of the next two years, this nevertheless represents a turnaround. More growth looks likely in the long run and with PZ Cussons trading on a P/E ratio of 20.4, it seems to offer good value for money when compared to its sector peers. As such, while continuing to be a relatively volatile investment, it could prove to be a highly profitable opportunity.

Millionaire potential

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More reading

Peter Stephens owns shares of Premier Foods

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