2 surprisingly cheap UK shares to buy today

Here are two UK shares to buy right now that I think look undervalued right now but show tremendous growth potential over a five-year period.

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2022 is off to a chaotic start with the new Covid variant wreaking havoc globally. But markets around the world look strong and I think it is the perfect time to look at some companies on my list of UK shares to buy. One common investing rule is to invest in undervalued shares of stable businesses.

Although it is not an easy task, I tend to look at the sector a business operates in, competition, and recent financials when I am trying to pick cheap UK shares to invest in. And right now, Vertu Motors (LSE:VTU) and Big Yellow Group (LSE:BYG) look like bargains for my portfolio. Both companies operate in untapped niches within booming sectors, and I think they have massive potential.

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Automobile stock that grew 126% last year

The pandemic forced many households to cut down on extra expenses, and global used car sales saw a huge boost in 2020. I think this represents a broader need in the market. A brand new car is an expensive purchase for most, given rising prices, taxes, and running costs. I think the used car market will grow in tandem with the automobile industry over the next decade.

And the Vertu Motors stock is on a great run. Its share price is up 81% in the last six months and a whopping 126% in the last 12 months. And despite this incredible run, it is trading at a forward price-to-earnings (P/E) ratio of 5.5 times, which tells me that there is still a lot of room for growth.

But analysts expect Vertu Motor’s revenue to drop after consumer habits normalise in 2022. And the car dealership operates on a razor-thin margin of about 1.5%. Coupled with expansion efforts, this could wreak havoc on its share price if sales drop in the coming months. But I still remain optimistic about the potential of the industry, which is why I am watching this UK share closely to capitalise on any price drop.

Passive income real estate stock

Big Yellow Group offers self-storage solutions in the UK, a business that has seen a growth in popularity thanks to the e-commerce boom. BYG offers online vendors a cheap space to store and ship products from, as well as a personal space to store goods for people moving house. Storage spaces are very popular in the US and are seeing wider adoption in the UK as well.

At its current share price of 1,556p, the Big Yellow Group share price is up a healthy 39.8% in the last 12 months. It is trading at a forward P/E ratio of six times, making it very undervalued right now. Its 2.3% dividend yield is backed up by a year-on-year increase in revenue for the last four years. 

But there have been reports of prominent board members selling holdings in the last 12 months. Chairman Nicholas Vetch’s wife recently sold £2.9m worth of BYG stock at a price of 1,670p per share and CEO James Gibson sold £5.2m of his holdings at a price of 1,487p per share. The share price has fallen nearly 10% since the start of 2022.

But, this could just be investors taking profits after a solid run last year. And I am optimistic that the company can deliver strong financials this year. Given its passive income potential, Big Yellow Group is on top of my list of UK shares to buy right now.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Vertu Motors. 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.

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