Value stocks come in all shapes and sizes, but the one thing that unites them is price.
They’re generally considered to be the market’s cheapest stocks, shares that have been dumped by investors who have given up or believe the companies in question have no future.
However, there’s plenty of research out there that shows buying value stocks can help you beat the market if you’re willing to run against the herd.
With that in mind, here are three value stocks that could help boost your portfolio’s performance.
Trying to take off
Shares in Flybe (LSE: FLYB) have been under pressure for some time. The group has struggled to turn around its flagging operations despite numerous CEO changes cost-cutting and a capital raise.
After years of zero growth, most investors have given up on the company, and the shares now trade at a deeply discounted price-to-tangible book value of 0.6. This low valuation indicates the market believes Flybe is on the verge of collapse and the shares are worth less than the value of the company’s assets. But it looks as if the market is wrong.
City analysts expect it to report a net profit of £1.3m this year and £8.2m for 2018. Earnings per share of 3.00p are pencilled-in for 2018. Based on these figures, the shares seem severely undervalued.
Hacking issues
Investors have been wary of Trinity Mirror (LSE: TNI) ever since the phone hacking scandal broke a few years ago. After years of neglect, shares in the company now look undervalued despite the group’s problems.
Even though Trinity continues to experience sales declines in its legacy print business, analysts expect net profit to remain steady at around £100m over the next two years. Cash flow is robust and as well as paying down debt, Trinity is also repurchasing its shares.
Based on City forecasts Trinity’s shares trade at a forward P/E of 3.1, support a dividend yield of 5.6% and trade at a price-to-book value of 0.5. At this low valuation, it looks as if all of Trinity’s problems are baked into the share price, and any good news could drive a sudden re-rating.
Falling oil price
The falling oil price has weighed heavily on shares of Lamprell (LSE: LAM) during the past two years, but the cash-rich company has what it take to ride out oil’s cyclical downturn.
Indeed, within Lamprell’s latest trading update management reported that group cash at the end of 2016 is expected to be up year-on-year, despite falling revenue. At the end of 2015, the company reported a cash balance of $200m or about £160m at current exchange rates. For some comparison, at the time of writing Lamprell has a market capitalisation of £325m, so around 50% of the group’s market cap. is cash. Overall, shares in Lamprell are trading at a price-to-book value of 0.6.
