The FTSE and its constituents are renowned for some surprisingly cheap valuations. And given the recent drops in the stock market, certain shares have become even cheaper. So, here are three cheap stocks with valuations currently trading near decade lows that I’m buying in April.
1. Taylor Wimpey
Sky-high inflation, the mini-budget crisis, and soaring mortgage rates have caused the housing market to cool significantly over the past year. Consequently, housebuilder stocks have suffered, and Taylor Wimpey (LSE:TW) shares have been no exception.
That said, the stock has made a remarkable recover from its September lows, jumping 35%. Even so, the shares remain reasonably cheap as the builder’s valuation multiples are below historical averages.
Metrics
Taylor Wimpey
Industry Average
Price-to-book (P/B) ratio
0.9
0.9
Price-to-sales (P/S) ratio
0.9
0.8
Price-to-earnings (P/E) ratio
6.3
9.8
Forward price-to-sales (FP/S) ratio
1.2
1.2
Forward price-to-earnings (FP/E) ratio
12.8
10.4
Data source: Google Finance
With headwinds in the housing market starting to slow down too, now could be a good time to build my position. What’s more, house prices aren’t declining as much as initially anticipated. Provided this trend continues, the developer may even see an earnings surprise.
Data source: Nationwide, Halifax, Rightmove
Additionally, Taylor Wimpey has an immaculate balance sheet, boasting a sublime debt-to-equity ratio of 2%. Pair that with its asset-based dividend policy and an 8% dividend yield, and I don’t see why I shouldn’t buy more shares at these cheap prices.
2. Barclays
Next up is Barclays (LSE:BARC). The hybrid retail and investment bank has been caught up in the recent banking crisis. Therefore, the bank has seen its initial rally earlier this year go into reverse in the past couple of months.
But as Warren Buffett once said, “be greedy when others are fearful”. And given Barclays’ cheap valuation, I think the risk-reward proposition is certainly appealing.
Metrics
Barclays
Industry average
Price-to-book (P/B) ratio
0.3
0.7
Price-to-earnings (P/E) ratio
4.3
9.0
Forward price-to-earnings (FP/E) ratio
4.5
5.6
Data source: Google Finance
Having said that, investing in banks can be a risky affair given their business model. Nonetheless, the Blue Eagle bank’s lower-risk deposit base puts it in a firm position to protect itself from the turmoil. That’s because a large amount of its deposits are insured, making a bank run less likely.
Data sources: Lloyds, Barclays, NatWest, HSBC, Santander UK, Credit Suisse, SVB, Signature Bank
Therefore, I believe Barclays shares are very cheap at these prices. This can be backed by its average target price of £2.40, meaning that buying the stock today could present me with a potential gain of over 70% — and the last time I checked, Barclays isn’t a growth stock.
3. Marks and Spencer
Finally, a personal favourite of mine, Marks and Spencer (LSE:MKS). Although analysts were quick to write off the stock as inflation started to rear its head, the retailer has stayed resilient throughout.
As such, those who listened to the ‘sell’ calls from brokers may be regretting their decision, as M&S stock has gone on to rally almost 75% from its October lows.
Despite the sharp increase, the shares are still surprisingly cheap as all of its multiples remain comfortably below the industry average. And when considering the tremendous growth prospects lined up for the FTSE 250 stalwart, it’s a screaming buy for me.
Metrics
Marks and Spencer
Industry average
Price-to-book (P/B) ratio
1.0
1.4
Price-to-sales (P/S) ratio
0.3
0.3
Price-to-earnings (P/E) ratio
10.0
13.6
Forward price-to-sales (FP/S) ratio
0.3
0.5
Forward price-to-earnings (FP/E) ratio
10.5
12.9
Data source: Google Finance
A combination of sleeker stores, a tremendously improved clothing line, upgraded omnichannel experience, strong financials, and a potential return to dividends has me beyond excited. After all, these improvements have started to show up in the firm’s latest Christmas update which boasted record sales.
With footfall ticking up, a growing market share in food and clothing, and shopping frequencies increasing despite the cost-of-living crisis, I believe adding Marks and Spencer shares to my basket in April is one of the better investing decisions I can make.
The post 3 mind-blowingly cheap shares to buy in April appeared first on The Motley Fool UK.
Like buying £1 for 51p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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More reading
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If I’d invested £1,000 in Barclays shares a year ago, here’s how much I’d have now!
John Choong has positions in Marks And Spencer Group Plc and Taylor Wimpey Plc. The Motley Fool UK has recommended Barclays 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.