Used-car retailer Motorpoint Group (LSE: MOTR) is enjoying a roaring trade as the UK economy bounces back. Late July’s most recent trading update revealed that sales hit record levels in April and May. I reckon the UK small-cap share could continue to pull up trees too, as supply problems in the new car market boost demand for pre-owned vehicles.
Society of Motor Manufacturers and Traders data shows used car sales rocketed 108.6% year-on-year in the second quarter. Sales were also up 6.6% from the second quarter of 2019. It’s perhaps no wonder then that City analysts think Motorpoint’s annual earnings will rise 85% this fiscal year (ended March).
This leaves the company trading on a forward price-to-earnings growth (PEG) ratio of just 0.3. A reading below 1 suggests a stock could be undervalued by the market. I think this makes the company a great buy despite the ongoing threat Covid-19 poses to its operations.
Another cheap UK share I’d buy
I think NCC Group (LSE: NCC) is another cheap UK share that could be too good to miss. City analysts think earnings here will rise 37% this fiscal year, resulting in a bargain-basement PEG multiple of 0.7.
Demand for the FTSE 250 firm’s cyber security services are rocketing right now as the rise of e-commerce and flexible working encourages companies to invest more in protecting their IT systems. Indeed, the business recently upgraded its forecasts for the last financial year (ended May), thanks to a strong end to the period.
I’m expecting more encouraging news when full-year results are released on 14 September. The UK IT services share is up a whopping 62% over the past 12 months. I think this is a great stock to buy today despite the threat of larger competition from US giants Microsoft and McAfee to the FTSE 100’s Avast.
Raising the roof
News coming out of the UK housing market has been a little less encouraging over the past few weeks. Latest data from Halifax showed house price growth slow sharply in July as the tapering of the Stamp Duty holiday kicked in. The property tax is due to end completely in October and home prices could theoretically take a colossal hit.
This is a particular worry for UK shares like FTSE 250-quoted Redrow (LSE: RDW) as rising labour and raw material prices are already hitting profit margins. I think however, the threat of a heavy deterioration in the property market are baked into this housebuilder’s valuation. An expected 14% earnings rise this fiscal year (to June 2022) leaves it trading on a PEG ratio of 0.4.
But I expect the UK homes market to remain strong. This is because favourable lending conditions and huge government support for first-time buyers should remain in place. And I’d buy Redrow before full-year results come out on 15 September. The company said turnover at its regional homes business had beaten expectations last time it updated the market in June.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Microsoft. The Motley Fool UK has recommended Avast Plc, Motorpoint, NCC , and Redrow. 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.