Many UK shares plunged in value in the stock market crash. However, now the economic recovery is underway, it could be an excellent time to buy a basket of these cheap shares.
With that in mind, today I’m going to take a look at two companies that I think could be worth buying for the long term.
Stock market crash bargains
Auto Trader (LSE: AUTO) is expected to report a 30% decline in its current financial year. This forecast suggests the company has performed relatively well in the coronavirus crisis.
What’s more, as the largest online car marketplace in the country, Auto Trader is well-positioned to profit from the UK’s economic recovery. Indeed, after this year’s setback, City analysts are forecasting a 41% increase in earnings next year.
I reckon this could translate into large total returns for investors. Auto Trader has some of the best profit margins of all companies listed on the London market. Last year, the group reported an operating profit margin of 70%.
Thanks to low capital spending requirements, the company is free to return all excess cash to investors. Last year, the group returned £120m through share buybacks and dividends. I expect this trend to continue.
After the stock market crash, the shares are currently changing hands at a forward price-to-earnings (P/E) multiple of 25.8. That might seem expensive at first. However, it’s below the tech sector average of 26. As such, I think shares in Auto Trader could be worth buying as part of a basket of cheap shares today.
I’m also positive on the outlook for gambling company GVC Holdings (LSE: GVC).
This is one of the few companies that looks as if it will profit from the coronavirus lockdown. The group has reported that during the lockdown, the number of users on its platforms jumped by a double-digit percentage. This offset the impact of declining sports betting revenues.
Based on this performance, City analysts are expecting the company earnings growth of 19% this year, followed by growth of 48% next year.
Based on these projections, shares in the company are changing hands at a forward P/E of 10.6. That’s even after rising more than 100% from their stock market crash low.
I reckon this is too cheap for a business that has grown net income 10-fold over the past six years. Over the past six years, the company’s average P/E has been 18.
It also bodes well for GVC’s dividend. Based on current profit projections, analysts believe the company will restore a 38p per share dividend in 2021. That would give a dividend yield of 4.5% on the current share price.
Of course, the company’s outlook is highly uncertain at present. However, I think GVC’s performance in lockdown shows that it is well-positioned to whether any further coronavirus uncertainty. Therefore, I believe the stock could be worth buying today as the UK’s economic recovery gets underway.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Auto Trader. 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.