3 cheap UK shares to consider as summer holidays arrive

Will summer bring a new wave of interest in UK shares? Trading typically subsides as people take leave, but I think these shares could benefit.

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Young female couple boarding their plane at the airport to go on holiday.

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UK shares are on the up, with the FTSE 100 closing higher every year since Covid. Performance slowed recently as the general election approached but overall sentiment for the second half of 2024 remains positive.

This suggests there may still be some cheap buying opportunities to consider in our local market. Here are three shares that I think will enjoy growth this summer.

WHSmith

WHSmith (LSE: SMWH) has yet to recover its pre-Covid highs so a busy summer may just be what it needs. The high street newsagent and travel retailer recently expanded the number of stores in stations and airports. With travel expected to increase during the summer holidays, these stores are bound to enjoy increased foot traffic. 

Yet the retailer may want to focus on debt repayments. At £481m, its debt is higher than both cash and equity. The interest payments are sufficiently covered for now but it would have more money to play with if it reduced its debt. If summer doesn’t give it the boost it needs, further price growth could be throttled.

Since July 2021, the share price fell 30% but analyst forecasts remain favourable. Earnings are expected to grow at a rate of 24.7%, giving it a price-to-earnings growth (PEG) ratio of 0.9. And return on equity (ROE) is forecast to be a very promising 27% in three years.

Wizz Air

With the UK set for one of the wettest summers yet, punters will be fighting for cheap tickets to sunny European shores. The younger sibling of the UK’s cheap airlines, Wizz Air (LSE: WIZZ) continues to operate in the shadow of easyJet and Ryanair. It might struggle to compete with Ryanair’s prices but its customer service is more highly rated. And with a price-to-earnings (P/E) ratio almost half that of easyJet, it’s got far more room to grow. 

But that’s not all — future cash flow estimates suggest the current share price could be undervalued by almost 75%. My only concern is the €1bn in debt it holds – far higher than its €145m in equity. While cash reserves are sufficient to cover it, the cost required to reduce that load could limit funding for future expansion. Let’s see if summer can bring it some relief.

Pets at Home

One of the UK’s favourite success stories, this beloved pet store enjoyed spectacular success during Covid. Bored homeowners turned their attentions to their pets during lockdown, ordering toys and pampering gifts from the Pets at Home (LSE: PETS) online store.

However, as life returned to normal and the home office dream died, playtime ended. The shares are now down 43% since the September 2021 high. What’s more, its success has attracted competition and fickle consumers may stray, so Pets at Home might need to slash its high prices to retain business. In May 2023, it launched a bold rebranding strategy but the price has slid 20% since. While the economy may be partly to blame there’s also little evidence the plan worked.

Yet people still have pets and what better time to pamper them than summer? So with the economy recovering and the share price back at pre-Covid levels, business should return to normal. The stock was already doing well pre-pandemic so there’s every reason to believe it could resume that success.

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.

Mark Hartley has positions in easyJet Plc. The Motley Fool UK has recommended Pets At Home Group Plc and WH Smith. 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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