2 great stocks under £2

These two shares could offer growth at a reasonable price.

| 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.

Finding shares which offer growth at a reasonable price is one way of improving portfolio performance. Certainly, unearthing such stocks can be challenging while share prices in general are relatively high. However, buying shares at a price which is below their intrinsic value ahead of a period of potential improved performance could offer a sound risk/reward ratio for long-term investors. Here are two companies with share prices of £2 or less which could be worth a closer look.

Improving performance

Reporting quarterly results on Thursday was recruitment specialist Hays (LSE: HAS). The company’s net fees during the period increased by 10% on a like-for-like (LFL) basis. This pushed it to a record quarterly net fee performance, with most of its divisions performing well. For example, Asia Pacific recorded LFL growth in net fees of 14%, while Continental Europe was close behind with growth of 13%. However, the UK continues to be a troublesome market, with net fees rising by just 1% LFL.

Despite this, the company reported that conditions in the UK remain stable overall. Since it is not the company’s largest market and it has a wide geographic spread, an uncertain outlook for the UK is unlikely to have a major impact on its overall performance.

With the Hays share price being 191p, it appears to offer good value for money. It is expected to post a rise in earnings of 13% in the current year, which puts it on a price-to-earnings growth (PEG) ratio of just 1.3. Certainly, the company is a cyclical stock and a margin of safety is likely to be required by investors. However, with loose monetary policies set to be pursued by many developed economies across the globe, the prospects for further rises in profitability beyond the current year seem high.

Low valuation

Also offering a bright investment outlook is Dixons Carphone (LSE: DC). The company trades at a price of 193p after falling 38% in the last six months as the company released a profit warning. In the short run, its shares could be somewhat volatile and may fall further as investor sentiment remains weak. However, with the stock now trading on a price-to-earnings (P/E) ratio of just 7.1 it seems to offer a wide margin of safety.

Certainly, the outlook for retailers in the UK is tough. Inflation is above and beyond the rate of wage growth and this could cause a delay to the purchase of big ticket items such as fridges, laptops, mobile phones and washing machines sold by Dixons Carphone. Furthermore, a weaker pound may make items such as mobile phones even more expensive for UK consumers.

Therefore, it would be unsurprising for its profitability to come under further pressure beyond the 19% decline which is forecast for the current year. However, with a solid business model and such a wide margin of safety, the stock could deliver impressive growth in the long run.

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.

Peter Stephens does not own shares in any company 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.

More on Investing Articles

Investing Articles

5 FTSE 100 shares to consider buying for passive income right now

The FTSE 100 is having its best start to the year for ages, and that's pushing the top dividend yields…

Read more »

Investing Articles

One overlooked cheap share to tap into the year’s hottest theme?

This Fool describes the key things to think about when investing in copper stocks and analyses one cheap share to…

Read more »

Investing Articles

A cheap FTSE 100 stock that’s ready for a dividend hike in 2024

This banking giant is one of the FTSE 100's greatest dividend stocks. And at current prices, our writer Royston Wild…

Read more »

Growth Shares

Is the BP share price set to soar after Michael Burry invests in the firm?

Jon Smith takes note of a recent purchase from the famous investor behind The Big Short and explains his view…

Read more »

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

I’d focus on Kingfisher now after the Q1 report leaves the share price unmoved

With the share price near 262p, is the FTSE 100’s Kingfisher a decent investment now for dividends and business recovery?

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

£500 buys me 493 shares in this 7.4% yielding dividend stock!

The renewable energy sector remains out of favour. As a result, there are some high-yielders around, including this dividend stock.

Read more »

Road trip. Father and son travelling together by car
Investing Articles

If I’d put £10k into Tesla stock 2 years ago, here’s what I’d have now

Tesla stock has fallen in the past few years. But the valuation looks temptingly low now, as we approach a…

Read more »

Google office headquarters
Investing Articles

Up 41.5% in a year, here’s why Alphabet is one of my top stocks to buy

Our author thinks Alphabet is one of the best stocks to buy. He says its undervalued, highly profitable and has…

Read more »