Three Emerging Growth Plays Offering Great Value

Joel Anderson  |

The principles of value investing frequently don’t end up getting a lot of attention in the world of emerging growth companies. You don’t typically pick through small-cap stocks looking for a bargain; you sift through them looking for the next big thing. Growth, not value, is why you go for companies like this.

However, that perception alone could be just the sort of market inefficiency that leads quality investments to get overlooked. Any company that’s selling at a price that represents a tiny multiple of its revenue, or that is already showing a steady stream of profits, deserves a second look.

So, here’s a collection of three emerging-growth stocks that offer solid value. Each has a P/E ratio under 15 and PEG and P/S ratios under 1, all while also receiving a generally positive outlook from analysts. They may not offer up the sort of excitement that those zero-revenue tech stocks with a potentially disruptive new app, but they still have the potential to provide solid returns.

Sparton Corp. (SPA)

Market Cap: $141.86 million

P/E: 11.88

P/S: 0.33

PEG: 0.88

Sparton Corp. designs and builds complex electromechanical devices and sophisticated engineering products, working largely with the defense industry at home and abroad. As a stock, Sparton Corp. appears to be getting short shrift from the markets. Not only is the company attractively priced based on its current earnings, but it’s projecting gains that have its forward P/E at 7.77. All told, the company’s steady decline after peaking at almost $35 a share in early 2014 doesn’t appear to have a clear explanation, especially when the company has been clocking steady year-over-year revenue gains since 2011. If Sparton’s declining share prices eventually hit a support level, it’s not hard to see the various attractive valuation metrics helping spark a rally.

JA Solar Holdings (JASO)

Market Cap: $459.77 million

P/E: 4.9

P/S: 0.23

PEG: 0.52

Before anything else is said about JA Solar Holdings, it has to be noted that the Chinese stock markets have been rocked by a ton of volatility since last year. Plenty of prudent investors are likely going to pass on any Chinese stock, regardless of how attractive, until things there appear to stabilize. However, for some of the more risk-on among us, that chaos could just as easily be disguising a big opportunity. And if you are ready to throw caution to the wind and jump in with a Chinese company, JA Solar Holdings may be a solid option. Clearly, at its current price, the company’s reported financials should be extremely attractive, with a P/B of 0.50, a P/C of 1.61, and a P/FCF of 5.26 in addition to that tiny P/S and PEG.

Park-Ohio Holdings Corp. (PKOH)

Market Cap: $368.32 million

P/E: 7.54

P/S: 0.24

PEG: 0.58

Park-Ohio is a global manufacturing services and products company. A global manufacturing services and products company that had a really rough 2015 as shares shed more than 40% of their value. However, that lengthy sell-off may have positioned the stock for a rebound as its price valuations are currently looking pretty good. The company’s also shown steady revenue growth since 2010, giving any investor who tends to focus on income statements a lot to like. The stock’s currently in a downward wedge pattern, though not one that appears to be hitting a break-out point anytime soon. Either way, analysts and institutional investors alike seem to have given Park-Ohio their vote of confidence, so the potential for a reversal seems to be present.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Companies

Symbol Name Price Change % Volume
PKOH Park-Ohio Holdings Corp. 33.68 0.83 2.53 40,728 Trade

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