Two cheap shares I reckon investors should be seriously considering are JD Sports Fashion (LSE: JD.) and Barratt Developments (LSE: BDEV).
Here’s why!
JD Sports
I think JD Sports has been one of the worst hit stocks during recent turbulence.
The shares are down 23% over a 12-month period from 171p at this time last year, to current levels of 131p.
I do understand why JD Sports shares have taken a hit. Weakened consumer spending linked to rising interest rates, inflationary pressures and other increased living costs have hit the FTSE 100 incumbent hard.
Performance, and the short-term outlook has been hurt. This is also the biggest ongoing risk, too. There are no clear signs as to when the current malaise could end, so JD Sports shares are in the doldrums.
However, looking past recent troubles, there’s a fantastic underlying business with excellent long-term prospects, in my view. The shares look very tempting right now on a price-to-earnings ratio of just 12 today, and a forward P/E ratio of 10, based on forecast performance.
Despite recent issues, the firm recently posted an update which showed resilience and its dominant market position. The firm still outperformed the sportswear market in the last fiscal year. Like-for-like sales rose by 4.2% year on year, and organic growth came in at 8.4%.
Once the economic picture is clearer, the firm should get back to its aggressive growth levels, as it continues to expand into international markets. Plus, performance could return to pre-volatility levels.
Finally, sporting events this summer including Euro 2024, the Paris Olympics, and the T20 Cricket World Cup, could provide a short-term boost. Typically, sporting events with a global reach boost the sales of sportswear clothing and footwear.
Barratt Developments
It’s easy to understand why Barratt shares haven’t progressed much in recent months.
Higher interest rates and inflationary pressures have caused two issues for the business. One is higher costs making building homes more expensive, and margins tighter. The second is higher mortgage rates, causing the house buying market to cool significantly, therefore making it harder for builders like Barratt to sell homes. These are also the ongoing risks, despite murmurings of interest rate cuts. However, I view these as short-term issues.
From a fundamentals view, the shares look dirt-cheap on a price-to-earnings ratio of just seven. Plus, a dividend yield of 6% looks well covered. However, I do understand that dividends are never guaranteed.
Now could be a good time to buy shares for long-term growth and returns, if you ask me. Barratt’s dominant market position and wide profile will come in handy when the dark cloud of economic uncertainty dissipates. This is mainly because the housing imbalance in the UK needs to be addressed. Demand for homes is far outstripping supply. This could be a long-term money spinner for the firm.
