2 professional service stocks offering buying opportunities

Long-term growers with temporary setbacks can turn out to be bargains.

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Value investors look for successful, growing companies, but may not buy them immediately, depending on the price that the market is offering for them. When problems occur, the market can sometimes misprice stocks, although the value of the company may not change that much. That's the opportunity that investors are waiting for.

Here are two companies that have standout track records of growing business. In the past few years temporary setbacks have brought their share prices down to attractive levels. They may be good additions to your portfolio as they recover.

The applied information service provider SAI Global Limited (ASX: SAI) has grown earnings per share steadily in the last five years. It helps companies manage risk, achieve compliance and drive business improvement.

Its share price recovered well after the GFC and revenue has risen every year since then. However, statutory net profit in FY2013 was a net loss due to write-downs. Its share price fell to about $3.30 in March 2013 and has recovered to $4.16 now. The dividend yield is 3.6% and the PE is 19.

That fall in profit could be seen as a one-off event compared to its past record of rising earnings and the first half of FY2014 showed it to be one. Underlying net profit in the interim was up 11.6%. Statutory profit was down only 2.1% compared to 1H FY2013.

ALS Ltd (ASX: ALQ), the testing and analytical laboratory services provider, has doubled its net profits in the past five years. It services various sectors like mining, life sciences and energy. Through acquisitions it has grown revenue and benefited from the mining boom.

With that sector not as strong, its share price has reflected that change by being in a downtrend since mid-2012. Recently, it hit a low of about $7.00 and now is $7.43. Its PE is 16 and the dividend yield is 5.5%.

The company's first half result for FY2014 saw interim net profit gain about 38%, yet due to the continuing effects of the mining pullback and a long and unseasonably severe winter in the US, it is now forecasting full year net profit will be around $160-$170 million. That is down from FY2013.

Again, short-term situations can affect good businesses, so compared with the company's long record of growth, this may be an opportunity to start a position and follow the stock.

Foolish takeaway

It always pays to be careful, even with stocks. When you see a business going through difficult periods, understanding the problems and how permanent they are can give you an edge on other investors who drop stocks easily. Investing is a marathon, not a sprint.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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