Key Points
- Many growth shares have suffered double-digit declines making them look relatively cheap.
- The convenience store market size is £44.3bn, which one rising FinTech stock is capitalising on.
- The surging demand for battery metals is sending cobalt prices through the roof, leading to record-breaking revenue for a UK mining business.
It’s a time of increased volatility in the stock market. While the FTSE 100 has delivered relatively strong results in recent months, not all stocks have been blessed with the privilege. But in my experience, volatility breeds opportunity. And with that in mind, let’s explore two UK shares I think are looking rather cheap.
A rising FinTech star
One stock that’s had a bit of a rocky journey in recent months is PayPoint (LSE:PAY). The business is a payments and e-commerce solutions provider for convenience store owners. Historically, the group has been highly dependent on cash transactions, which proved problematic when the pandemic struck, and everyone turned to contactless payments.
But PayPoint has now changed tactics, making several acquisitions to reposition the business to become a new leader in digital payments. And looking at the latest results, it seems this new strategy is working. In its third quarter of 2022, ended in December, total revenue came in 21.3% higher than a year ago, putting an end to its long record of stagnant growth.
Acquisitions obviously have their risks. If a target company fails to deliver on expected performance, or complications arise when integrating operations, it can end up destroying shareholder value rather than creating it.
Nevertheless, I remain cautiously optimistic. And with a PE ratio of around 20 versus the £44.3bn market opportunity, the UK share is looking relatively cheap to me.
A cheap UK mining share focusing on battery metals
Inflation may be wreaking havoc on most businesses. But for the mining sector, rising commodity prices are helping to significantly expand profit margins. And the increasing price effect is only amplified for metals related to electric vehicles and renewable energy technology, thanks to surging demand.
This is lovely news for Anglo Pacific Group (LSE:APF). The royalties company has historically been dependent on the sale of thermal coal to drive its bottom line. But over the years, management has begun diversifying the portfolio toward battery metals. Its recent $205m (£152m) acquisition of a cobalt mine royalty is proof of that.
And, so far, this strategy is paying off. Because when looking at the latest quarterly results, portfolio revenue climbed 74% to a record-breaking $23.6m (£17.5m). A lot of this growth can be attributable to price inflation, due to supply chain disruptions. And therefore there is a risk of prices falling again once these disruptions are resolved.
But with demand for battery metals unlikely to disappear any time soon, I think Anglo Pacific could be in for a good run. And with shares still trading below pre-pandemic levels, despite its superior financial position, I believe UK stock is looking rather cheap.
