Is there a golden buying opportunity in these cheap shares?

I’m on the prowl for cheap shares to add to my portfolio in March. The problem is that many stock prices are not as cheap as they were a few weeks ago. That’s because the UK stock market has risen.

At FTSE 100 top 8,000 points for the first time last week, enjoying a day – or maybe hot? – in the sun after years of underperformance. In addition, the focus is domestic FTSE 250 has bounced back from a miserable 2022.

Index	Performance in 2023
FTSE 100	+7.2%
FTSE 250	+5.8%
FTSE AIM All-Share	+4.1%

So, my hunt for things has led me to a small stock. and Epwin Group (LSE: EPWN) has caught my eye.

Discount savings

Epwin is a UK based door and window manufacturer. It manufactures and markets PVC and aluminum windows, as well as cladding, decking, and other related products. The company provides repair, maintenance, and repair, new building, and social housing sectors. It has a large network of traders, plastic stockists, and window and door installers.

Its shares are listed in the Alternative Investment Market (AIM). At 78p a share, the sports company has a market capitalization of £113m.

This stock price is down 26% in the last 12 months. That leaves the stock trading at a price-to-earnings (P/E) ratio of around 8.4. About half of the average market P/E, according to my data provider.

But there is nothing in the financials to suggest that such a large discount is warranted. Far from it, in fact.

Strong trading

In its year-end trading update published last month, the group reported that revenue increased by 8% year-on-year to around £355m. This was largely driven by price increases to cover cost inflation, as well as bolt-on acquisitions completed in the year, which contributed £4m in revenue.

As a result, the company expects to report annual adjusted profits before tax of around £16.3m. This is in line with market expectations, and is an increase over 2021.

I am encouraged that the company has successfully demonstrated the ability to increase prices and preserve profits. After all, it’s no secret that the macroeconomic environment has been challenging for many UK-focused businesses.

The stock pays dividends, with a current yield of 5.4%.

Optimism and uncertainty

Management also announced that trading in 2023 remains strong so far. It remains confident of continued profit growth through both medium and long term.

A core part of Epwin’s growth strategy is the completion of selective and value-adding acquisitions. It has been busy on that front recently, buying Hampton Decking (a private composite decking company) for £4m in December. It also acquired PVC recycling company Poly-Pure in September for an initial cash consideration of £15m.

Of course, the company faces headwinds in a sluggish and uncertain UK economy. But I think the uncertainty has probably been priced into the stock. It may be cheap, but I think it’s worth it.

Looking ahead, analyst consensus for the year is more than £360m in sales, around £20m in profits, and a dividend of 5.0p per share. If the payment is made, which is not guaranteed, this will represent a forward dividend yield above 6%.

All things considered, this cheap stock looks interesting enough to make it onto your March buy list.