3 Of My Favourite ‘Dirt Cheap’ Stocks: BAE Systems plc, Centamin PLC And Ashtead Group plc

These 3 stocks look very cheap and well-worth buying: BAE Systems plc (LON: BA), Centamin PLC (LON: CEY) and Ashtead Group plc (LON: AHT)

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While the FTSE 100 may be within 5% of its all-time high, there are still a number of stocks trading at ‘dirt cheap’ prices. As such, it remains a relatively appealing time to allocate capital to the stock market, with bond yields being incredibly low and likely to rise when interest rates finally creep up, and property offering paltry yields and limited capital upside.

Challenging Sector

Of course, one reason why some stocks are cheap right now is a challenging operating environment. That’s the case for BAE (LSE: BA) (NASDAQOTH: BAESY.US), which has seen its top and bottom lines come under severe pressure in recent years due to austerity being en vogue across the developed world. In fact, things were so bad for BAE last year that it released a profit warning and, once the market had reacted (negatively) to that, its shares have soared – posting gains of 16% in the last year.

Despite this, they are still very, very cheap. BAE trades at a 20% discount to the FTSE 100’s price to earnings (P/E) ratio of 16 and, as such, could be the subject of an upward rerating over the medium to long term. Furthermore, BAE offers a yield of 4.2% at the present time despite paying out a rather modest 54% of profit as a dividend. This provides further evidence of the appealing value of BAE’s shares.

Should you invest £1,000 in Ashtead Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Ashtead Group Plc made the list?

See the 6 stocks

Disappointing Performance

While BAE released a profit warning last year, its net profit ended up being just 10% lower than on the previous year. This situation contrasts markedly with gold miner, Centamin (LSE: CEY), which saw its bottom line sink by 41% last year, and is due to see it tumble by another 36% in the current year. It may come as little surprise, then, that Centamin trades at a significant discount to its net asset value, with it having a price to book (P/B) ratio of 0.89. This indicates that its shares could move significantly higher – especially since its profitability is expected to improve next year.

Growth Potential

Meanwhile, support services company, Ashtead (LSE: AHT), looks cheap for a very different reason. It is expected to grow its earnings by 26% in the current financial year, followed by a rise of 16% next year. That’s a superb rate of growth and means that the company’s bottom line is set to be 46% higher in 2016 than it was in 2014.

As such, investor sentiment could be catalysed over the medium term – especially since Ashtead trades on a price to earnings growth (PEG) ratio of just 0.6. This indicates that it offers growth at a reasonable price, with its shares appearing to be worth buying alongside those of BAE and Centamin.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of BAE Systems. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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