Even the best companies can experience periods of extreme share price volatility. Take the following two shares: Unite Group (LSE:UTG) and Sage Group (LSE:SGE). They’ve collapsed in value over the last year, leaving a terrific opportunity for shrewd investors seeking oversold stocks to buy.
Want to know what makes them excellent turnaround shares to consider? Read on…
Growing market
Unite Group is the UK’s largest provider of student accommodation, operating 142 properties across 22 university towns. It’s slumped 44% in value over the last year during a tough period for the company.
Student numbers are still rising, but rental growth and reservations have cooled, reflecting pupils’ currently fragile finances. In February, the company cut its full-year guidance and warned that rents would grow at the “lower end” of a 2%-3% range. To add to its problems, the soaring oil price is raising inflationary pressures and interest rate risks. Borrowing costs can balloon for property stocks when rates increase.
Yet the long-term outlook for its market remains robust as ever. Britain’s centuries-old position as an academic hub isn’t going to change any time soon. I expect revenues and earnings to pick up sharply when economic conditions improve.
This makes Unite shares an attractive recovery share in my book. And right now it offers terrific value, with a forward price-to-earnings (P/E) ratio of 9.3 times. But that’s not all — the dividend yield for 2026 is a pumped-up 8.4%.
One final thing: as a real estate investment trust (REIT), Unite must pay at least 90% of annual rental profits out in dividends. And dividend cover is robust at 1.2, making it a great share for dividend investors to consider.
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Another bargain stock to buy?
Sage’s share price has been hit by a double-whammy in recent months. It means the software share’s down 33% on a 12-month basis.
Firstly, it’s dropped on fears that widescale artificial intelligence (AI) adoption will hit client demand. Broader economic worries have also hit the broader IT sector, worsened by the escalating Middle East conflict.
It’s no surprise that fears of a cyclical downturn have hammered Sage’s shares. But have AI-related concerns been overblown? I think so. Over the longer term, I’m confident the FTSE 100 share will rebound strongly as sales increase.
I’m confident for a few reasons. Accounting, payroll and HR are critical processes in any business, and I’m not certain millions of them will be willing to entrust this to AI. Particularly when you consider what a low proportion of a company’s total costs Sage’s software account for.
Furthermore, Sage is actually integrating AI into its products to turn this danger into an opportunity. And it seems to be paying off, driving double-digit revenue growth.
There’s clear risk here, but I think this is more than baked into Sage’s share price today. The forward P/E is 16.5 times, miles below the 10-year average of 31-32.
