After this year’s stock market crash, there’s an abundance of cheap shares on the market. So with that in mind, today I’m looking at three strong, cheap UK shares, which have the potential to produce large returns for investors.
Cheap UK shares to buy
Shares in Premier Foods (LSE: PFD) slumped in the stock market crash. However, the stock has recovered following the company’s upbeat statements over the past few months.
Sales at the food company and owner of the Mr Kipling brand jumped during the lockdown. City analysts are now forecasting a 64% increase in earnings this year. If Premier hits this target, it will be one of the few UK shares to have benefited from lockdown.
The extra cash will also help the company reduce its debt and pension obligations. This could be a big positive for the business in the long run.
As such, I think it could be worth buying Premier Foods as part of a diversified portfolio. The stock is currently dealing at a forward price-to-earnings (P/E) multiple of 9 compared to its long-term average, which sits in the mid-teens.
As the company builds on its success of the past few months, I think investor sentiment towards the business could improve dramatically.
Stock market crash bargain
Workspace Group (LSE: WKP) is one of the many casualties of the coronavirus crisis. The operation, which specialises in flexible workspaces and property, has seen the demand for its offices slump.
As the world returns to work, demand should increase. Demand for flexible office space may also outpace previous levels because employers seem to want more flexibility in the new normal. This may benefit Workspace more than many other businesses in its sector.
As well as this potential, the stock appears to offer a wide margin of safety at current levels. It is currently dealing at a price-to-book (P/B) value of 0.5.
These numbers suggest the stock could jump by as much as 100% from current levels as the economic recovery begins. Only a handful of other cheap UK shares offer the same kind of potential.
Therefore, I think it could be worth adding Workspace to a basket of stock market crash bargains.
McCarthy & Stone
McCarthy & Stone (LSE: MCS) has suffered from the same pressures as the two cheap UK shares profiled above.
However, I also think this stock market crash bargain has a bright future. The company, which specialises in developing properties for older people, is one of the biggest in its sector. This gives it impressive economies of scale. In addition, the UK’s population is ageing rapidly, and the demand for specially adapted properties is only increasing.
This suggests that while investor sentiment towards the business may be depressed today, it should benefit from the above tailwinds over the long term. I think these tailwinds can help the company overcome any short-term fundamental issues and stage a strong recovery in the years ahead.
I think there’s also a chance that the demand for the firm’s building may exceed pre-Covid levels in the years ahead as the demand for specialist housing grows.