2 bargain shares for under £2

Bilaal Mohamed takes a closer look at two of the cheapest shares available in the FTSE 250 (INDEXFTSE:MCX).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Europe’s second largest travel firm Thomas Cook Group (LSE: TCG) updated the market this morning with its first quarter results to the end of December 2016. The group reported a solid financial performance with like-for-like revenue up by £14m to £1,618m. It was helped by growth in sales of holidays to Greece, Spain and long-haul destinations, together with new seat-only routes, offsetting the impact of reduced sales to Turkey and Egypt.

Growth in online bookings

Gross profit came in £4m higher than the same period last year at £357m, while the improvement of the gross margin by 10 basis points to 22.1% reflects the increased focus on own-brand and selected partner hotels. The company continues to focus on its strategy for profitable growth with online bookings up by more than 10% in the UK and by an impressive 40% in Germany, with its 24-hour satisfaction promise now extended to 250 hotels in long-haul destinations for winter 2016/17.

In its last set of full-year results, the company acknowledged that it had been a difficult year with profits dented by weaker consumer confidence in Germany and Belgium following the Brussels terror attacks. But it seems as if the early actions management took to shift its holiday programme into the Western Mediterranean and long haul have paid off, with revenue maintained at group level, thanks also to a stronger euro.

Return of the dividend

Additionally, a focus on Thomas Cook’s own-brand holidays and partner hotels helped to deliver record profit margins in its UK and Northern European businesses. Management also decided to reinstate its dividends after an absence of five years with a payout of 0.5p per share. The dividend is due to be paid on 5 April (ex-dividend 9 March), and although the payout is modest, it reflects management’s confidence in its strategy to build sustainable and profitable growth.

The group’s share price has been drifting lower since the start of 2014, and Thomas Cook now trades on nine times forward earnings for the current financial year to September, falling to just seven for FY 2018. I think the difficulties the tourism industry is facing seems to be priced-in, and Thomas Cook could be worth buying as a long-term recovery play.

Attractive yield

Meanwhile, another troubled FTSE 250 company that’s seen its share price drifting lower over the last couple of years is SIG (LSE: SHI). The UK’s leading specialist distributor of insulation, dry lining and related products saw its share price surge last month. That was after a trading update for the year ended 31 December revealed that group sales had risen to £2.74bn, an 11.2% improvement on the previous year.

Numerous profit warnings have resulted in the share price plummeting over the past couple of years, boosting the dividend yield as a result. The Sheffield-based firm now offers a far more attractive yield that now stands at 4.1% and is covered twice by forecast earnings.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »