2 cheap stocks I’d buy today

Bilaal Mohamed uncovers two small-cap growth stocks available for less than £1.

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Stocks and shares come in all shapes and sizes, as do their prices. For instance, £77 will buy you just one solitary share in FTSE 100 mining giant Randgold Resources at today’s prices, whereas Tesco’s shares are available for less than £2 each. When you consider that at £15bn the UK’s largest retailer has a market value more than twice that of the Africa-focused gold miner, then you realise that on their own, share prices mean very little.

A very thin slice

We all know that when you buy shares in a company you are effectively buying a slice of that business, albeit a very thin slice. The overall size of the business is determined by multiplying the share price by the total number of shares available to give the current market value of the firm. Using the example above, Tesco currently has 8,189m shares issued and held by its shareholders, whereas Randgold has only 94m shares issued, thereby making each share that much more expensive.

That said, many novice investors will still view shares as ‘cheap’ or ‘expensive’ based on their absolute prices. Even if this were the case, seasoned investors will tell you there is a world of difference between shares that are cheap and those that are good value. Investors on the hunt for genuine bargains should be seeking out the latter. With this is mind, I’ve picked out two AIM-listed stocks that are not only cheap to buy at less than £1, but in my view also offer great value given their prospects.

A healthy Alliance

Alliance Pharma (LSE: APH) is an international speciality pharmaceutical company based in Chippenham, Wiltshire. The AIM-listed business has a strong track record of acquiring the rights to established niche products and it currently owns or licenses the rights to around 90 pharmaceutical and consumer healthcare products worldwide.

Interim results announced this morning revealed that sales for the six months ended June rose 8% year-on-year to £50.3m, with underlying pre-tax profits edging higher to £11.9m. There was strong growth from the company’s top-selling scar-diminishing product, Kelo-cote, as well as its MacuShield brand, a dietary supplement used to treat age-related vision loss.

Alliance trades on an undemanding P/E rating of 13 for the full year to December, falling to 11 for 2018. The company continues to explore opportunities to expand its product portfolio, and I rate the shares a buy given the potential for further growth.

Idox gets my vote

Public sector information management firm Idox (LSE: IDOX) is another AIM-listed business whose shares are available for less than a £1. Last month the Reading-based group acquired electoral back office software firm Halarose for £5m, in line with its strategy to focus on the public sector.

It’s hoped that the acquisition of the Oxfordshire-based firm will create a larger, more effective, and focused Idox elections business, capable of accelerating its growth and increasing its market share through cross selling initiatives to both existing and new customers in the UK and in Europe.

Idox’s share price has suffered a sharp decline since hitting all-time highs in May, and I believe this presents growth-focused investors with a great opportunity to buy the shares on a relatively modest P/E rating of 14.

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. 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.

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