I reckon Associated British Foods and this bargain growth stock could stage a dramatic comeback

Double trouble The first is FTSE 100 listed Associated British Foods (LSE: LON:ABF). The Primark owner has had a rough time of it lately, its share price down a meaty 20% in the past six months, leaving the stock trading at similar levels to five years ago. International consumer products group PZ Cussons (LSE: PZC) is down 31% over the last year, and trades almost 40% lower than five years ago.

Things look particularly tough for FTSE 250 listed PZ Cussons which fell more than 6% today after publishing its half-year trading update to 30 November. It warned investors that trading conditions in its Nigerian market remain challenging due to local economic problems, while also saying that consumers remain under pressure in all its other markets across Europe, the US and Asia.

Soft soap The group is battling on in the UK, delivering new product launches including Imperial Leather ‘No Drama Llama’ Foamburst and Carex ‘Unicorn’ hand wash, and enjoyed strong growth of its St Tropez product range in the US, although weak Asian currencies offset growth in that region.

I looked at PZ Cussons a couple of months ago, and advised investors that they were more likely to clean up elsewhere. Trading at 15.7 times earnings, today’s dip fails to offer a really enticing buying opportunity, despite the decent 3.7% yield. There may be brighter times ahead, though. After four years of negative earnings per share (EPS) growth, City analysts are predicting 5% in the year to 31 May 2019 and 8% the year after. Long-term investors may still clean up.

Sugar, sugar Associated British Foods posted a positive set of full-year results last month with group revenue up 3% at constant currency to £15.6bn, and operating profit up 5% to £1.4bn. Primark, Grocery, Agriculture and Ingredients all look strong, despite weakness in the sugar business from lower European sugar prices. It also hiked its dividend by 10% although the yield is still disappointingly low at 2.1%, even if cover of 2.9 suggests progression.

These are tough times for bricks and mortar retailers but again, you are not getting a discount on the price with a valuation of 16.7 times earnings. That surprises me with EPS only forecast to grow just 1% in the year to 30 September 2019 (mostly due to the sugar slowdown). However, if Primark cracks the US clothing market that could change and in a dramatic way. The early signs are promising but there is a long way to go.

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Foods, glorious foods Associated British Foods has been knocked harder than it deserved in recent months, having also been caught up in the wider market sell-off. My Foolish colleague G A Chester reckons it has Warren Buffett qualities, and could be a great long-term buy and hold. Recent turbulence could offer an opportunity to buy it at a discount.

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