There are plenty of bargain shares on offer in the current market. However, some of these stocks have all the hallmarks of classic value traps.
With that in mind, here are three bargains shares that look to be on offer right now with the financial firepower to survive the coronavirus crisis.
Bargain shares to buy
As bargain shares go, Investec (LSE: INVP) stands out. The asset manager looks cheap on all metrics. It is currently dealing at a price-to-earnings (P/E) ratio of just 3 and a price-to-book (P/B) multiple of 0.4. That implies the whole business is worth 150% more than the current share price.
Further, shares in the asset management and banking group are dealing at an EV/EBITDA multiple of 1.4. For some comparison, the rest of the investment banking and services industry is trading at an EV/EBITDA multiple of 10. This gives the stock a wide margin of safety at current levels.
Put simply, Investec looks like a bargain. What’s more, the company is highly liquid and well capitalised according to its recent trading statements.
With a potential upside of more than 100% when investor confidence returns, it could be worth taking a closer look at this bargain share before the rest of the market catches on.
A return to growth
Another one of the bargain shares that have recently caught my eye is Capita (LSE: CPI). Capita has been struggling to turn itself around over the past few years, and analysts were expecting the group’s recovery to really take hold in 2020.
However, the coronavirus crisis has set the group back. In a trading update at the end of March, the company announced that while it operates a range of core services that its clients depend on, some parts of the business will be adversely affected.
The good news is that Capita has £450m of liquidity to see it through the crisis. On top of this, Capita’s order book at the end of 2019 was £6.7bn, and the company has been drafted in to help the government respond to the crisis.
With plenty of capital to keep the lights on, as well as customers lined up when things return to normal, Capita’s long-term outlook is bright. With the stock trading at a P/E of below 3, based on 2019 earnings, there’s a good chance Capita could double or triple from current levels over the next few years.
888 Holdings (LSE: 888) is not particularly cheap as bargain shares go, but the stock does look cheap compared to history. Shares in the gaming group are dealing at a P/E of 11.7. That’s compared to the long term average of around 20.
888 appears to be one of the few companies that will benefit from the coronavirus crisis. At the end of March, it reported its best day ever with a 20% jump in customer numbers as people stayed indoors.
If this trend continues, the stock looks deeply undervalued as current levels. As well as its discount valuation, shares in 888 also support a dividend yield of 5.3%. It has a net cash balance of around $52m to support operations.
However, unlike many other businesses, it doesn’t look as if 888 will have to dig into this reserve during the crisis.
On a list of the market’s top bargain shares, 888 certainly stands out in the current market.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.