2 UK shares I’d buy after searching for top penny stocks

These low-cost UK shares caught my attention as I was looking for penny stocks to buy. Here’s why I’d load up on them today.

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The electric vehicle (EV) craze continues to gain momentum with British drivers. And I think buying car retailers like penny stock Pendragon (LSE: PDG) is a good idea as the buildout of EV infrastructure gathers pace, improving the appeal of low-carbon vehicles.

This week, Shell announced it plans to install an extra 50,000 EV chargers in the UK by 2030. This is in addition to the 50,000 it’s already promised by 2025. Such rollouts will be key in persuading drivers to trade their gas guzzlers in for EVs, easing concerns over range and ease of refuelling.

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I like Pendragon in particular because of its large network of some 160 showrooms. Having a large physical presence is critical given that EV buyers tend to visit dealerships for advice before buying.

A low P/E ratio

Pendragon has warned of the threat of stock shortages due to weak car production rates. It’s a problem that threatens to last too as Covid-19 lockdowns in China come into effect and the supply of car parts remains tight.

Still, on the balance of things, I think the benefits of owning Pendragon shares offset the dangers. Moreover, at current prices of 24p per share the business offers the kind of value that’s hard to ignore.

Today, the penny stock trades on a forward price-to-earnings (P/E) ratio of just 7.9 times. Any reading below 10 times suggests that a stock looks cheap, based on profits forecasts.

A top share for tough times

Financial services provider FRP Advisory Group’s (LSE: FRP) another low-cost UK share I’d buy today. I think business activity here could soar as Britain’s economy grinds to a halt.

Bibby Financial Services has said that 2.1m small-to-medium-sized businesses are “just about” breaking even right now. Companies are suffering as the cost of living crisis and inflation hit profits and cashflow dries up.

Things look set to get worse for business before they get better too. The National Institute of Economic and Social Research now thinks the UK will tip into a technical recession later in 2022.

Expensive but exceptional

I am concerned by FRP Advisory’s slightly-toppy valuation. At 134p per share, the nearly penny stock trades on a forward P/E ratio of 22.6 times. Shares that command elevated readings are at a higher risk of selling off when profits forecasts come under pressure.

However, I think the colossal near-term opportunities it has still makes FRP a screaming buy right now.

FRP provides financial services (such as help with restructuring and raising capital) to companies that are in trouble. This means sales tend to strongly pick up during times of economic stress like today.

I also like FRP from a long-term perspective. Its market is highly fragmented and this provides excellent opportunities for acquisitions. The company has a strong track record on this front and kept the momentum going with its takeover of BridgeShield Asset Management Limited late last month.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Pendragon. 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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