Is this FTSE 250 growth share an unmissable bargain after plunging 68% in 5 years?

I’ve had been watching the performance of a struggling growth share for some time now, wondering whether to buy. So far I’ve resisted, and I’m glad I have.

I’m talking about landscaping and building products supplier Marshalls (LSE: MSLH), which reports its first-half results today. The backdrop is dismal, with the FTSE 250 stock slumping 38% over one year and a brutal 68% over five.

Some investors may wonder why I’m tempted by such a struggler, but I’ve found that buying beaten-down stocks can pay off, given time. The early months of the recovery are often the most dramatic, so it makes sense to get in early. It’s a risky strategy though.

Marshalls share price slides again

Yet just because the stock has plunged 68%, doesn’t mean it can’t fall another 68%. I’ve had my fingers burnt more than once, but the winners far outweigh the losers.

Today’s results didn’t signal the start of the recovery, sadly. Instead, Marshalls shares are down 1.7%. So what’s going on?

Group revenues actually climbed 4% year on year to £319.5m, thanks to a solid showing from its roofing and building products units.

However, its core landscaping division suffered a “modest contraction”, even though its improvement plan “delivered higher volumes and market share gains”.

End markets remain challenging with subdued demand squeezing prices, while a less profitable product mix hit profitability. The result? Group adjusted operating profit fell 16% to £28.4m, while adjusted underlying earnings sank 15% to £42.9m. No wonder investors aren’t buying.

FTSE 250 recovery stock?

There were positive signs, with adjusted operating cash flow conversion “strong” at 94% and the balance sheet “robust” with net debt cut by 3% to £151.6m.

CEO Matt Pullen hailed the benefits of the group’s “diverse portfolio”, which has helped it withstand today’s subdued market. He also highlighted a plan of action to cut costs and drive profits in its ailing landscaping division. But the downbeat mood was reflected in a 15% cut to the interim dividend, from 2.6p to 2.2p.

Marshalls reaffirmed its revised full-year guidance, forecasting adjusted pre-tax profits between £42m and £46m.

To me, this looks like a good company in a struggling sector. Housebuilding stocks generally are taking a beating, as the cost-of-living crisis squeezes buyers. With inflation set to predicted to hit 4% later this year, the pain isn’t over yet.

Dividend cuts never help

Last week’s Bank of England interest rate cut may help, but analysts warn this could be the last we see this year. With more tax hikes likely in the autumn Budget, Marshalls may find current challenges persist.

Pullen is “encouraged by the Government’s commitment to new housing and infrastructure”, the problem is that progress is likely to remain slow. The UK is nowhere near hitting its target of building 300,000 homes a year.

I’m going to keep watching Marshalls. A price-to-earnings ratio of 12.9 suggests there’s value here. The trailing yield is 3.94%, which is pretty high for a growth stock, today’s cut notwithstanding. I can still see a Marshalls recovery story, just not yet. I can see are more exciting growth shares to consider buying on the FTSE 250 today.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.