Bank of Georgia (LSE:BGEO) and Crest Nicholson (LSE:CRST) are two dirt cheap FTSE 250 growth stocks I’m backing to help my portfolio grow. For me, both of these stocks are undervalued and have great upside potential.
Currently, I’m favouring passive income shares over growth stocks because they’re offering me returns now rather than in the future. This is because high inflation and interest rate rises incentivise returns this year rather than in five years’ time.
However, while I’m confident Bank of Georgia and Crest Nicholson can grow substantially in the future, both these stocks are offering dividends this year.
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Bank of Georgia
Over the year to February, the Tbilisi-based bank had risen by nearly 40%. However, Russia’s invasion of Ukraine saw the share price tumble. Russia and Ukraine are two of Georgia’s largest trading partners and the war is anticipated to weigh on economic growth, but not as much as some might expect.
For me, the Bank of Georgia looks very cheap with a price-to-earnings (P/E) ratio of just 3.3. However, I think this stock has long been undervalued. Prior to the war, its P/E ratio was still below five. This is largely because Georgia is considered a more risky place to invest than the UK or the US. But I’d consider Georgia a high-growth market which has put market-based principles at the centre of its long-term economic strategy.
The bank’s performance was good in 2021, buoyed by strong economic data. In March, Georgia’s Office for National Statistics said that the economy had grown by 14.6% year-on-year. The Bank of Georgia in turn posted a pre-tax profit of £192m, more than any year in the last five.
Georgian economic growth is predicted to only be 2.5% in 2022, due to the war in Ukraine, which may impact the bank’s growth. Further escalation of the war may hurt the share price even more, but I’m confident about the long-term growth prospects here. I have recently bought shares in the bank and am looking to buy more.
Crest Nicholson
I’ve owned and followed Crest Nicholson shares for a long time. It’s not been an easy ride, but I’m now confident that the business is facing in the right direction and that there’s plenty of upside potential here.
The London-headquartered builder has struggled in recent years but took positive steps in 2021, posting a pre-tax profit of £86.9m. That was a considerable swing from the loss registered in 2020. In January, Crest said it was confident of continued progress in 2022, noting that 63% of revenue for the 2022 financial year was already covered. It also talked of a “transformed” balance sheet with net cash at year-end totalling £252.8m, up from £142.2m at the end of 2020.
Yes, there are challenges ahead. The business has said it may incur up to £120m in extra costs as part of its commitment to end the cladding crisis. Equally, rising interest rates may dampen demand for homes while inflation is making the cost of building higher.
But I’m in this for the long term. I think Crest Nicholson has a good product and I think demand for new homes in the long run will only increase.
