I’m thinking about adding these dirt-cheap stocks to my shares portfolio. Each trades on a bargain-basement price-to-earnings growth (PEG) multiple below 1.
Making an impression
4imprint Group’s (LSE: FOUR) a great way to ride the continued rebound in marketing spending in my opinion. The business generates almost all of its profits by making and selling promotional products in the US. You know the sort: mugs, pens, USB dongles, bags and the like. This is a steadily-growing industry in which 4Imprint has been relentlessly grabbing market share.
City analysts believe earnings will rise 46% year-on-year in 2022. This leaves it trading on a PEG ratio of 0.7, a decent distance below that benchmark of 1 that suggests a stock could be undervalued. Orders at the business are bouncing back strongly and the total tally for 2021 recovered to an impressive 90% of pre-pandemic levels. Pre-tax profits came in towards the upper end of expectations for the full year, too, a good omen for the new year.
4Imprint could encounter problems if the US economy begins to stutter, however. A surprise drop in non-farm jobs in January — the first drop since the end of 2020 — certainly caught my eye this week. But as things stand I think there’s more to be encouraged about than worried by at 4Imprint.
A mega-cheap leisure stock
Now that Covid-19 lockdowns have ended, Britain’s ten-pin bowling craze of recent years has exploded again. Ten Entertainment Group (LSE: TEG), which operates almost 50 bowling centres across the UK, is a cheap stock that’s obviously well placed to play this boom.
Ten Entertainment’s sales soared an astonishing 32.4% between 1 May and Boxing Day from pre-pandemic levels. The leisure stock’s January trading update also showed the business had record profits each month since June 2021. Given this evidence it’s perhaps no surprise that City analysts think profits here will soar 260%+ in 2022.
Encouragingly Ten Entertainment is adding venues to maximise its revenues opportunities too. It plans to open four new bowling centres this year alone. The ongoing public health emergency poses an obvious risk as further social restrictions could transpire at short notice. But I think the company’s cheapness reflects this possibility. Ten Entertainment carries a forward PEG of just 0.1.
In the fast lane
I also think Wincanton (LSE: WIN) has a bright future as e-commerce steadily grows. The transport titan offers a range of end-to-end fulfilment services that enable retailers and manufacturers to reach their customers. And it continues to do a roaring trade despite the end of coronavirus lockdowns on physical retail; revenues in its Digital and eFulfilment operation surged 51% year-on-year in the three months to December.
My chief concern for Wincanton is a chronic shortage of van and lorry drivers. This has the potential to cause operational disruptions and push up costs. Still, City forecasters don’t think this will derail near-term earnings growth (an 18% profits rise is predicted for this fiscal year to March 2022. A 9% increase is anticipated for financial 2023 too). I think Wincanton’s forward PEG ratio of 0.6 could make it too cheap for me to miss.