When it comes to hunting for cheap shares, I like the look of Mondi (LSE: MNDI), the packaging and paper business.
In August 2021, the share price was above 2,000p. But it’s below 1,600p as I write this. So, in that sense the shares are cheap. However, City analysts expect earnings to decline by 20% in 2023.
Strong cash flow and dividends
You see, 2023’s earnings are up against a tough comparative year. For 2022, the firm is expected to post earnings around 70% higher than the prior year. Meanwhile, cash flow and the shareholder dividend look set to hold up well this year. And I reckon the current valuation indicators are attractive.
Over the past year, the share price is down about 15%. And now near 1,582p, the forward-looking dividend yield for 2023 is around 4.2%.
Mondi’s operations have been caught up in the difficult economic environment of recent times. Costs have been fluctuating and the firm even had some operations in Russia when the war in Ukraine escalated.
Nevertheless, there may be a clearer road ahead for the business. Although positive long-term outcomes are never certain. However, the directors have been optimistic about Mondi’s prospects for the years ahead.
We’ll find out more with the full-year results report due on 23 February. But I’d be inclined to dig in with deeper research now with a view to picking up a few shares to hold for the long haul.
However, I’m also keen on Intertek (LSE: ITRK), the quality assurance services company. The business has a steady record of revenue, earnings, cash flow and shareholder dividend payments. And those measures have generally been growing a bit each year.
A quality business
And such attributes have made the stock attractive to investors. So, Intertek has carried a full-looking valuation for as long as I remember. But the difficult environment of 2022 knocked the share price off its high perch. And at 4,500p, it’s about 15% lower than it was a year ago.
However, City analysts forecast good trading ahead. And they expect earnings to grow by almost 9% in 2023. Therefore, I’d be inclined to move in now and research Intertek with a view to buying some of the shares while they’re down. And I’d aim to hold them for the long term as operational progress hopefully unfolds in the years ahead.
In November 2022, the firm delivered a robust trading statement with a positive outlook statement. And that’s just what I’d be looking for to justify a long-term position in the shares now. However, as with all stocks, there are risks as well as positive potential. And even steady businesses with an apparently strong trading niche can run into setbacks from time to time.
Nevertheless, although I have no spare cash to invest right now, I’d consider these two if I did have some. And I’d be comfortable embracing the risks and taking a contrarian approach by buying the stocks while they’re depressed.
