Black Friday means huge discounts on consumer items. However, the concept can also be applied to shares, with a number of stocks selling for what appear to be exceptionally low prices at the present time. Certainly, lower share prices are on offer because of either internal challenges or tough operating conditions. This could mean a high degree of volatility in the short run. However, for patient investors these two stocks offer top notch value for money and stunning capital gain potential.
easyJet
easyJet (LSE: EZJ) has seen its share price declining by 35% in the last year due to a weak operating environment. Demand for flights has come under pressure following terrorist attacks in Europe and North Africa, while the airline has also suffered from industrial action. This has caused its profit guidance to fall, with the company now expected to record a fall of 20% in its bottom line in the current financial year.
Clearly, this is disappointing. However, things could get worse before they get better since uncertainty surrounding Brexit and the outlook for the EU economy could cause easyJet’s financial performance to decline to a greater extent. But with the company’s shares trading on a forward price-to-earnings (P/E) ratio of 12.2, they now offer excellent value for money. They also have a wide margin of safety so that if easyJet’s outlook does deteriorate, its share price may not decline by a significant amount.
In addition to a low valuation, easyJet offers a high income return. Its dividend yield currently stands at 4% and shareholder payouts are well-covered at 2.1 times. This indicates that even if easyJet’s profit falls, it should still be able to raise dividends at a rate that’s faster than inflation. Therefore, its total returns over the medium term should be highly impressive.
Fresnillo
Gold and silver miner Fresnillo (LSE: FRES) has endured a torrid time since the US election. Its shares are down by around 22% since then and could fall further. The gold price has come under pressure due to the strength of the dollar, the prospect of US interest rate rises and the risk-on attitude adopted by investors since Donald Trump was elected.
In the short run, those three factors look set to push gold lower. This could cause Fresnillo’s share price to fall even further. However, long-term investors shouldn’t despair. The outlook for gold beyond the here and now is exceptionally positive. It should gain in popularity as Trump’s high spending and low taxation policies create higher levels of inflation, while gold may also prove to be popular as uncertainty builds in 2017. Not only is the world economy facing an unpredictable US president, Brexit could also hurt confidence in the global economy.
Fresnillo trades on a price-to-earnings growth (PEG) ratio of 0.4, thereby offering a wide margin of safety. While volatility is likely to be high, capital gains from buying Fresnillo now should be substantial for investors who can look beyond the next few months.