3 dirt-cheap UK shares to buy now

Rupert Hargreaves explains why he thinks these are the best UK shares to buy now as a value investor with a love for contrarian stocks.

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I have been looking for dirt-cheap UK shares to buy now for my portfolio following the recent market turbulence. Three companies, in particular, have attracted my attention. 

Overlooked tech share?

The first on my list is the payment group PayPoint (LSE: PAY). I think this is an overlooked UK tech champion. The organisation offers installed payment services for customers and retailers, such as card machines. It also provides services for consumers who want to pay bills using cash or credit cards. 

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I think the business fulfils an essential part of the e-commerce and digital payments infrastructure, bridging the gap between digital payments and brick-and-mortar retailers. 

However, unlike other companies in the sector, shares in the firm seem to be relatively ignored. They are trading at a forward price-to-earnings (P/E) multiple of just 12.3. On top of this, the stock offers a dividend yield of 5.8%. 

Based on this valuation, and for the reasons outlined above, I would buy PayPoint for my portfolio of UK shares. Key risks the company may face going forward include competition and regulatory factors, which could impact growth. 

Top shares to buy now

Another dirt-cheap UK share, which is a leader in its respective market, is the financial services group Plus500 (LSE: PLUS). In the past, I have avoided this company because of its complex business model. I did not really understand how the group made money and if profitability was sustainable. 

Over the past couple of years, I have got to know Plus a little better, and it has consistently proven itself to the market. Net profit has risen threefold since 2015, and the company is highly cash generative. Its balance sheet has a net cash balance of $714m, and the stock yields 5.7%. Management has also been returning cash with share repurchases. 

Considering these qualities, I would take advantage of the recent slump in the shares and buy the stock while it is trading at a discount P/E of 5.7. 

Although I will be keeping an eye on growth headwinds, the most important is competition. Plenty of companies in the financial services sector are looking to grab market share. 

Recovery play

As well as the two stocks above, I would also buy Reach (LSE: RCH) as a cheap recovery play. The regional and national news publisher has been struggling to turn itself around in the face of falling newspaper advertising revenues over the past five years. 

However, last year was somewhat of an inflexion year for the organisation, as digital revenues surged. Increasing visibility of its websites means the group is now back on a more stable growth footing and, more importantly, it has eliminated borrowings from its balance sheet. 

Management now has plenty of headroom to invest for growth and, in 2020, the corporation restored its dividend for the first time since the financial crisis. 

Today, the stock yields 2.7%. It is also trading at a forward P/E ratio of 7.2. Considering these figures and Reach’s newfound balance sheet strength, I am excited about the company’s outlook. 

That said, I will be keeping an eye on its progress. While the turnaround seems to be producing results, there will always be the risk that the firm will return to its old ways.

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended PayPoint. 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.

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 considered, so you should consider taking independent financial advice.

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