When looking for shares to buy now for my portfolio, I like to concentrate on cheap equities. With that in mind, here are three dirt-cheap FTSE 250 stocks that I would buy today.
FTSE 250 bargains
The first company on my list is the buy-to-let specialist lender OSB Group (LSE: OSB). Thanks to the growing demand for financial products, the company reported in August that pre-tax profits for the first half of its financial year more than doubled. Based on this growth, City analysts believe the stock is trading at a forward price-to-earnings (P/E) multiple of just 6.4.
As well as this attractive valuation, shares in OSB support a dividend yield of 4.2%.
As the country continues to recover from the pandemic, I think challenger banks like OSB should see a strong recovery in earnings and sales. That is why I would snap up shares in the lender today while they are trading at a discount multiple.
As we advance, the group may face risks, including higher costs and competition for custom from other lenders.
Shares to buy for growth
I would also acquire Premier Foods (LSE: PFD) for my portfolio of dirt-cheap FTSE 250 shares. This company is currently experiencing bumper demand for its food products.
Full-year adjusted pre-tax profit is expected to be at the top end of its expectations after sales grew 6.3% in the first quarter of its financial year. Its international business also appears to be growing at a rapid clip. Sales increased 17%, compared to 2019 levels in the first quarter.
After making a substantial dent in its pension and debt obligations last year, the company now has more money to spend on marketing and product innovation. I think this clearly shows in the recent results.
Based on growth expectations, the stock is trading at a forward P/E of 9.6, which I think looks cheap compared to the company’s potential. That is why I would buy the stock.
Some challenges it could face going forward include inflationary pressures on wages and ingredients, as well as competition.
The final company I would buy from my portfolio of FTSE 250 shares is the global ingredients group Tate & Lyle (LSE: TATE).
Earlier this year, Tate completed the sale of a controlling stake in its primary products business for $1.3bn. The transaction essentially broke the group apart.
The remaining business is focused on food and beverage solutions designed to make food taste better and healthier. This is a faster-growing global market than the legacy division.
The company is looking to return £500m to investors through a special dividend, and the rest of the proceeds will be used to reduce debt.
Despite the transformative deal, the stock is selling at a P/E of 11.9. That looks too cheap to me, especially considering the organisation’s growth potential over the next few years.
Risks the company may encounter going forward include cost and ingredients inflation as well as competition in the food additives business. All of these challenges could prove to be a drag on earnings growth.
The Bank Of England has acknowledged that inflation is likely to peak above 4%, and stay there until the second quarter of 2022.
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Rupert Hargreaves has no position in any of the 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.