This is turning out to be a good month for the FTSE 250 index. In August so far, its average value is up 3.6% from July. This is the fastest growth seen in four months and also the first time that the index average is over 23,000.
With this as the backdrop, it is hardly surprising that FTSE 250 stocks are pricier than usual. But if I look hard enough, I can still find stocks that are still trading at a price lower than their performance would suggest. These dirt-cheap stocks can be potentially good investments for me.
Here are two of them.
#1: Plus500: a high-dividend-yield FTSE 250 share
The trading platform is presently trading at a price-to-earnings (P/E) ratio of 4.4 times. On the face of it, there appears to be some justification for it. One, its share price as of right now, is actually lower than it was last year on this date. Two, its latest results look discouraging too. In the first half of 2021, its revenue fell by 39% and its profits by 48% from the same time last year.
However, there is another side to its story too. Consider its share price. While it is true that on a point-to-point basis it has declined, if I compare the average of the past 12 months with the year before, there is still an increase. Also, its latest results look disappointing only because last year was exceptionally good for Plus500 (LSE: PLUS). As the company said in its results last year, the robust increase was “driven by heightened volatility in unprecedented market conditions”.
Moreover, compared to 2019, the last normal year before the pandemic, its performance is still significantly improved. The company is also optimistic about its future, and last but not least, it has a significant dividend yield of 7.2% compared to 1.8% for the FTSE 250 index as a whole.
#2. CMC Markets: Dirt-cheap stock with good prospects
Another financial trading platform, this FTSE 250 stock has other parallels with Plus500. CMC Markets (LSE: CMCX) also has a relatively low P/E of 6.8 times. It also has a high dividend yield of 7.3%. And there are other positives to the stock too.
Unlike Plus500, its numbers are more encouraging. For the year ending 31 March, 2021, its pre-tax profits increased by an impressive 127% and its revenues were substantially increased as well. Its latest trading update for the quarter ending 30 June, the company also reported client numbers at similar levels to those last year. However, it does appear that it, too, could see some moderation in results for the first half of the year, based on client trading activity. Nevertheless, it has a positive outlook.
Also, its share price has increased by 38% over the past year. Even on average, these increases have been sustained for some time now. If there is a consistent decline in trading activity, though, the stock increase may not continue. Based on the FTSE 250 index’s recent performance, I am more positive than not about it, however.