It’s bargain hunting time and I’m on the prowl! Here are two promising growth stocks I think are undervalued and worth consideration.

Hummingbird Resources (LSE: HUM) is a gold mining company with operations in Liberia, Mali, and Guinea. It’s a young company with a £68m market-cap and 8.6p share price.

Like many smaller companies, it’s struggled to grow since the pandemic. High interest rates and throttled demand means the price has plummeted from its five-year high of 40p in mid-2020.

But its revenue belies its low price. At £127m, it’s almost double its market-cap, giving it an excellent price-to-sales (P/S) ratio of 0.5 times. What’s dragging down the price is negative earnings. With expenses outweighing gross profit by 30%, most recent earnings came in at a £24m loss. That puts its current earnings per share (EPS) at -3p.

So what makes me think it has value? Well, for one, it’s trading at 98% below fair value based on future cash flow estimates. So it’s doing what small companies should be doing, bringing in tons of cash and spending even more. As long as today’s expenses equate to profit tomorrow, it’s all gravy. 

And analysts seem to think they will. The price-to-book (P/B) ratio’s also good, at 0.8 times. If those estimates are accurate, it’s equivalent to buying £1 shares for 80p.

So what’s the catch? Well, it’s only forecast to return to profit next year. And that’s IF the current economic recovery continues. After several stagnant years, gold took off in 2023 and continues climbing. But fears of an impending recession still linger, which could send revenues tumbling again.

I don’t think that will happen, so I’m happy to snap up these bargain shares while they’re cheap.

M&C Saatchi

M&C Saatchi’s (LSE: SAA) a well-known and established advertising firm founded by the brothers Charles and Maurice Saatchi. It’s the parent group to now-private Saatchi & Saatchi, once a FTSE 100 constituent on the London Stock Exchange.

Having reported a £3.53m loss in its latest earnings results, it’s currently unprofitable. Revenue dipped 1.9% in its latest full-year 2023 earnings results released in April.

But sales are high, compared to its market-cap, with a P/S ratio of 0.6 times. Admittedly, it’s increased from 0.4 last year, which isn’t the direction I want to see it going. Still, it’s below the industry average and Saatchi’s a company with the clout to bring in sales. With cash flows expected to recover in the coming 12 months, the share price is estimated to be undervalued by 53%. 

So with all those factors combined, the once-king of advertising is expected to return to profit this year. Earnings are forecast to reach £14.6m by 2025, despite the ongoing drop in revenue.

It’s rare to find proven talent like this in a slump, so grabbing such stocks can be a once-in-a-lifetime opportunity. But like anything in life, nothing’s guaranteed and many factors are beyond the ability to forecast. Still, I see great value here and strong evidence of a recovery — and I don’t want to miss out on those potential returns.