Down more than 20% this year, here are 2 oversold stocks to consider buying today

Roland Head explains why these unloved FTSE 250 shares are on his list of stocks to consider buying in this market correction.

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Image source: Domino's Pizza Group plc

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I’m always looking for unloved stocks to buy to add to my long-term holdings. That means stock market corrections like we’re seeing now can be good news for me.

The two shares I’m going to look at today are both good quality FTSE 250 shares, with long track records of strong profitability and reliable dividends.

Even so, both are down by more than 20% since the start of 2024. I reckon these companies are starting to look too cheap to ignore.

#1: a takeover target?

Price comparison website operator MONY Group (LSE: MONY) – which owns MoneySuperMarket.com — has lagged the wider market this year, dropping nearly 25%.

July’s half-year results from MONY showed revenue up 5% and pre-tax profit up 8%, to £44.1m.

Chief executive Peter Duffy sounded confident to me. He confirmed that full-year results are expected to be in line with broker forecasts.

These analyst estimates suggest MONY’s adjusted earnings could rise by 7% to 17.2p per share this year.

That’s not stellar growth. But these forecasts mean that MONY shares trade on just 12 times expected earnings, with a 6% dividend yield.

That seems cheap to me, for a business with 20%+ operating margins, strong cash generation, and almost no debt.

Why I’d buy MONY

Admittedly, the long-term growth potential of this business is unclear. MoneySuperMarket.com isn’t the market leader in this segment and faces tough competition, especially in the lucrative car insurance market.

Even so, I can’t help being interested at current levels. I would not be surprised if private equity buyers became interested as well.

Rival GoCompare.com was bought by a private buyer a while ago, while CompareTheMarket.com is also privately owned.

MONY looks cheap to me. It’s on my short list of stocks to consider when I have funds available to invest.

#2: Domino’s is getting back on track

Shares in takeaway owner Domino’s Pizza Group (LSE: DOM) fell on Tuesday 6 August, when the company reported a disappointing set of half-year numbers.

Domino’s is another member of my 20% club. These are stocks I view as good businesses whose share prices have slumped this year.

I think Domino’s shares are starting to look oversold and could bounce back strongly, as they have done previously.

Chief executive Andrew Rennie only took charge last year. However, he is hugely experienced in the Domino’s system globally. Over a multi-decade career, he’s been a multi-site franchisee and the chief executive of Domino’s operations in a number of other countries.

I think he’s a good hire. I believe him when he says the business is getting back on track during the second half of this year. Progress could be helped by falling food prices and new store openings.

The main risk I can see is that Domino’s will eventually reach the limit of its growth potential in the UK. If too many stores are opened, profits could slump and the stock could fall further.

I can’t rule out this risk. However, profitability remains strong today and Domino’s shares are now trading on just 14 times 2024 forecast earnings. That looks a very reasonable price to me.

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.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Domino's Pizza Group Plc and Mony Group Plc. 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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