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At FTSE and the constituents are famous for some surprisingly cheap valuations. And given the recent drop in the stock market, certain stocks are getting cheaper. So here are three cheap stocks with prices currently trading near their decade lows that I bought in April.
1. Taylor Wimpey
Sky-high inflation, a mini-budget crisis, and rising mortgage rates have caused the housing market to cool dramatically over the past year. Consequently, the housebuilder stock has suffered, and Taylor Wimpey (LSE:TW) shares are no exception.
That said, the stock has recovered strongly from its lows in September, rising 35%. Even so, the stock remains cheap as builder valuations are lower than historical averages.
| Metric | Taylor Wimpey | Industry Average |
|---|---|---|
| Price-to-book (P/B) ratio. | 0.9 | 0.9 |
| Price-to-sales ratio (P/S). | 0.9 | 0.8 |
| Price-to-Earnings (P/E) ratio. | 6.3 | 9.8 |
| Price-to-sales ratio (FP/S). | 1.2 | 1.2 |
| Price-to-earnings ratio (FP/E). | 12.8 | 10.4 |
With the headwinds in the housing market starting to slow down, now could be a good time to build my position. What’s more, house prices have not fallen as much as anticipated. If this trend continues, developers may see a revenue shock.
Additionally, Taylor Wimpey has a healthy balance sheet, with a debt-to-equity ratio of 2%. Couple that with an asset-based dividend policy and an 8% dividend yield, and I don’t see why I shouldn’t buy another stock at such a low price.
2. Barclays
Next is Barclays (LSE:BARC). Hybrid retail and investment banks have been caught up in the recent banking crisis. Therefore, the bank has seen its rally earlier this year reverse in recent months.
But as Warren Buffett says, “be greedy when others are afraid”. And given Barclays’ low valuation, I think the risk-reward proposition is certainly attractive.
| Metric | Barclays | Industry average |
|---|---|---|
| Price-to-book (P/B) ratio. | 0.3 | 0.7 |
| Price-to-Earnings (P/E) ratio. | 4.3 | 9.0 |
| Price-to-earnings ratio (FP/E). | 4.5 | 5.6 |
Having said that, investing in banks can be a risky affair due to their business model. However, the lower risk deposit base at Blue Eagle bank puts it in a strong position to protect itself from turbulence. This is because most of the deposits are insured, making the bank unable to operate.
Therefore, I believe Barclays shares are very cheap at these prices. This can be supported by an average target price of £2.40, which means that buying shares now could offer a potential gain of over 70% – and last I checked, Barclays is not a growth stock.
3. Mark and Spencer
Finally, my personal favorite, Marks and Spencer (LSE: MKS). Although analysts were quick to write off stocks as inflation began to recede, retailers remained resilient.
So those who heeded the ‘sell’ call from brokers may regret their decision, as M&S shares have rallied almost 75% from their October value.
Despite the sharp rise, the Shares are still surprisingly cheap as all multiples remain comfortably below the industry average. And when considering the tremendous growth prospects lined up for FTSE 250 stalwart, it’s a screaming buy for me.
| Metric | Marks and Spencer | Industry average |
|---|---|---|
| Price-to-book (P/B) ratio. | 1.0 | 1.4 |
| Price-to-sales ratio (P/S). | 0.3 | 0.3 |
| Price-to-Earnings (P/E) ratio. | 10.0 | 13.6 |
| Price-to-sales ratio (FP/S). | 0.3 | 0.5 |
| Price-to-earnings ratio (FP/E). | 10.5 | 12.9 |
The combination of leaner stores, a stylish clothing line, an updated omnichannel experience, strong financials, and the potential for a return to dividends makes me very excited. After all, these improvements began to appear in the company’s latest Christmas update that boasted record sales.
With footfall ticking up, a large market share in food and clothing, and the frequency of shopping increases despite the cost-of-living crisis, I believe that adding Marks and Spencer shares to the basket in April is one of the better investment decisions I can make.
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