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Stock market crash: 2 FTSE 100 shares I think are still dirt-cheap

The stock market crash in March has been followed by a powerful rally. Many FTSE 100 shares have bounced back strongly, and the index is now down by just 15% this year.

Some FTSE shares now look fully-priced to me. But I think there are still some bargains out there. Today, I want to look at two shares which I rate as bargain buys at current levels.

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Only a small hit from Covid-19?

Insurance group Aviva (LSE: AV) expects to take a relatively small hit from the coronavirus pandemic. As of 30 April, the company said that its general insurance division was expecting just £160m of extra claims as a result of Covid-19.

My sums suggest that, based on last year’s accounts, the company could pay these claims and still generate a small profit from its general insurance activities. If claims levels remained stable in May, I think the impact of this pandemic on the firm could be fairly limited.

This FTSE 100 share could yield 10%

Aviva has become a popular choice with income investors (including me) over the last few years. Strong cash generation and a low valuation meant that this FTSE stock offered a well-covered yield of about 7.5% at the end of 2019. The firm’s solvency coverage ratio of 206% — a measure of spare cash — was well above regulatory requirements.

All of this made the company’s decision in April to suspend its dividend a little surprising. Many shareholders suggested that the firm could have afforded the payout and only suspended it to avoid negative headlines.

In my view, there’s possibly some truth in this. Insurers were under pressure from the financial regulator to cancel dividends. It looks like Aviva’s board decided to put caution ahead of shareholder returns.

The board has promised to review the situation in the final quarter of 2020. Unless things get much worse, I’m pretty sure Aviva will pay a dividend for 2020. If the payout is reinstated at the level forecast for 2019, this FTSE 100 share could yield 10% next year. I suspect we’ll see a small cut, but with Aviva shares trading on just five times forecast earnings, I remain a buyer.

I still think this FTSE 100 share will double

Back in May, I said I thought the ITV (LSE: ITV) share price could double during a market recovery. So far, this FTSE 100 stock is only up by about 20%. But I haven’t seen anything to change my opinion on this television business.

My positive view is based on the fact ITV remains highly profitable and generates a lot of cash. Although falling advertising spend and the shift to online viewing has caused profits to fall in recent years, I think the business is adapting.

The steady growth of the ITV Studios production business has reduced the group’s dependency on revenue from broadcast television. And its online services are growing fast.

In 2019, ITV reported an operating profit margin of 16% and a return on capital employed of nearly 24%. Both figures show the group’s profitability is well above the FTSE average. Although 2020 will be a tough year, I think 2021 should be much better.

ITV shares now trade on 10 times 2020 earnings, falling to a multiple of eight times earnings for 2021. I’d buy this FTSE 100 share today.

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Roland Head owns shares of Aviva and ITV. The Motley Fool UK has recommended ITV. 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.