Despite the stonking performance of UK stock markets in 2019, there are still plenty of stocks out there that look deeply undervalued and could beat Bitcoin as an investment. Here are two FTSE 250 companies that still appear cheap and could potentially double your money in 2020.
Challenger bank Virgin Money (LSE: VMUK) has a lot going for it. The lender has tried to shake up the UK banking market over the past few years, and it seems as if customers are flocking to its offer.
Virgin Money registered a 4.6% increase in customer deposits in its last financial year, as well as 3% growth in overall lending. The lender’s most recent trading update shows that this growth has continued into fiscal 2020. In the three months to 31 December 2019, customer deposits increased 1.6% month-on-month or 6.2% on an annualised basis.
Despite the company’s growth in 2019, it reported a statutory loss of just under £200m. This loss was disappointing, but expected. 2019 was a transformational year for the organisation as the previously-named CYBG completed its merger with Virgin Money. After the merger, CYBG re-branded the whole group as a Virgin enterprise.
Now these headwinds are out of the way, 2020 should be a year of growth. Towards the end of last year, management started rolling out its new branch layouts. The company also introduced its first digital personal current account.
Without legacy costs and business integration charges, City analysts expect the bank to report earnings per share of 26p in 2021. This implies the stock is trading at a forward price-to-earnings multiple of just 6.8, around half the market average.
These numbers suggest the stock offers a wide margin of safety at current levels. On top of its discount valuation, the shares also support a dividend yield of 2.1%.
Recent updates from homebuilder Countryside Properties (LSE: CSP) also imply this stock could generate handsome returns for investors in 2020.
Countryside is making the most of the booming demand for new homes across the country. The business targets the higher end of the market with an average selling price of around £394,000 in the fourth quarter of last year.
And demand is still increasing. The group’s total forward order book at the end of 2019 was just under £1.6bn, up 65% year-on-year.
These numbers suggest the business is on track to achieve a better-than-projected performance during the next two years. Analysts are only forecasting revenue growth of 30% during this time. However, the company’s order book suggests growth is likely to be closer to 65%.
What’s more, current forecasts don’t seem to account for the fact Countryside’s order book growth is showing no signs of slowing. As such, now could be an excellent time for investors to snap up shares in this homebuilder before the market catches on to the value on offer here.
If earnings do indeed grow by 60% in the near term, it looks as if the stock is trading at a mid-single-digit P/E ratio. That implies the stock could double from current levels. There’s also a dividend yield of 3.5% on offer for income investors.
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Rupert Hargreaves owns no share 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.