Today, I’m searching for the best cheap stocks to buy for my portfolio. Here’s a brilliant bargain that trades just above penny stock territory.
A top share for tough times
The British economy is beginning to seriously toil as inflation leaps and the cost of living crisis worsens. The threat to many UK shares is growing and it could be time for me to take action.
One way I can do this is to buy some classic counter-cyclical shares. These are the companies whose products and services grow in demand as economic conditions become difficult.
Insolvency specialist Begbies Traynor Group (LSE: BEG) is one such UK share I think could protect me from the rising threat. And latest data from the Insolvency Service illustrates why.
Insolvencies soar
According to the government body, there were 2,114 company insolvencies in March. That was more than double the 999 recorded in the same month in 2021. It was also 34% more than the pre-pandemic levels recorded in March 2019.
Rising interest rates mean businesses are having to pay more for their borrowings. On top of this, soaring power costs and sinking consumer spending is also pushing many companies over the edge.
So firms like Begbies Traynor are becoming increasingly busy. Their activity is likely to keep rising too as inflation continues to rocket and the Bank of England responds by hiking rates.
The Office for Budget Responsibility certainly thinks price rises have some way to go. It thinks consumer price inflation will peak at 8.7% in 2022.
Growth hero
It seems increasingly likely that severe inflationary pressures will stretch into 2023 too. So it’s also perhaps no wonder that City analysts expect Begbies Traynor’s long record of annual earnings growth to roll on.
Current forecasts suggest that earnings will rise 24% in the current fiscal year (to April). They expect the bottom line to grow an extra 10% and 3% in financial 2023 and 2024 too.
Acquisitions keep coming
Begbies Traynor’s long record of earnings growth shows it’s not just a great stock to buy for right now however. The business has been extremely active on the acquisition front to give earnings an extra kick. Its track record on this front is pretty solid too as its recent profits history shows.
Pleasingly, Begbies Traynor has kept momentum going here, acquiring MAF Finance Group and Daniells Harrison Surveyors in the current fiscal year. The business has plenty of financial headroom with which to pursue further attractive opportunities too.
Begbies Traynor currently trades on a price-to-earnings (P/E) ratio of around 11 times. I think this is a bargain given the ‘nearly’ penny stock’s excellent growth prospects in the near term and beyond.
Profits could suffer if its acquisition-led growth strategy fails to deliver the goods. Begbies Traynor could also see earnings slow during strong economic periods. Still, at 107p per share, I think this growth stock might be too cheap for me to miss.