2 cheap shares investors can still grab

Lots of previously cheap shares have shot up recently, but there’s still value to find on the London market, such as these two stocks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The recent bear market is fast becoming yesterday’s news. And cheap shares are getting harder to find on the London stock market.

However, there are still some tempting opportunities out there. And I’d been keen to grab some of them because my belief is this bull run we’re now in has legs. 

One thing that recent difficult economic and geopolitical times have proved is the resilience and adaptability of many businesses. And I’d be keen to put my money into choice UK shares now to hold for the long term.

Technology for gaming

For example, I like the look of Playtech (LSE: PTEC). The company provides technology to the online gaming software industry.

In September with the half-year report, the business delivered a performance ahead of the directors’ expectations. And momentum continued into the second half.

Chief executive Mor Weizer said Playtech is “well placed to capitalise on the exciting market opportunities ahead.” And part of the strategy involves simplifying the business to focus efforts on the “high-growth” business-to-business (B2B) and business-to-consumer (B2C) gambling markets. Last year’s disposal of the company’s Finalto business was a “significant step” towards that goal.

Meanwhile, City analysts expect earnings to grow by about 9% this year. And with the share price near 542p, the forward-looking earnings multiple is just over 10.

To me, the valuation looks attractive. And I’m considering the stock as a long-term hold to see if the company can build growth as it embarks on a new strategic direction. However, there’s a fair chunk of debt on the balance sheet to keep an eye on. And the shareholder dividend yield is paltry.

It’s also worth me bearing in mind that the company’s financial history is patchy. So I’d be looking for new growth to emerge and improve the figures going forward. However, positive outcomes are not certain.

Parts for trucks

Another I’m looking at is Castings (LSE: CGS), the iron casting and machining company that makes a lot of stuff for heavy truck manufacturers.

November’s half-year report delivered some impressive year-on-year figures. And the company said underlying demand for heavy trucks had been strong. Indeed, there was an improvement in “the conversion of forward schedules to actual sales” compared to the prior year.

Looking ahead, the outlook statement was bullish. And City analysts expect earnings in the current trading year to March 2023 to rise by around 45%. However,  the forecast for the following year is for an increase of just 4%, or so. 

But I reckon the valuation looks modest. With the share price near 355p, the forward-looking price-to-earnings ratio is about 12. And the anticipated dividend yield is running near 4.8%. But on top of that, the business has a multi-year record of running a net cash position on its strong-looking balance sheet.

However, this is a highly cyclical business. So a long-term investment in the shares now requires me to back my bullish view about the general economy. And that situation carries its own risks.

Nevertheless, I’m interested in both these stocks and would be inclined to invest if I had some spare cash.

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 assessed. Consider taking independent financial advice.

Kevin Godbold 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.

More on Investing Articles

Young female business analyst looking at a graph chart while working from home
Investing Articles

In a cyclical downturn, is there a buying opportunity in Croda shares?

With a positive sales outlook for 2024, is there a buying opportunity in Croda shares ahead of a potential recovery…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

£20,000 in savings? Here’s how I’d aim for £14,710 a year in passive income

With spare savings, this Fool would start generating passive income for a more comfortable retirement. Here he details how he'd…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,000 in savings? Here’s how I’d try to turn that into £581 a month of passive income

Relatively small investments in high-yielding stocks can grow through the power of dividend compounding into significant passive income.

Read more »

Photo of a man going through financial problems
Investing Articles

These are the FTSE’s biggest dogs over the last year!

The FTSE 100 has fallen far behind other major market indices over the past 12 months. However, these three sliding…

Read more »

Investing Articles

My top 3 stock market lessons from the Nvidia volcano eruption

Can we learn anything from the explosive rise in Nvidia's share price? Here are three Foolish reflections from this stock…

Read more »

Abstract 3d arrows with rocket
Investing Articles

Is boohoo the best near-penny stock to buy today?

This Fool asks why the boohoo share price has collapsed and whether now might be a good time to invest…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »