2 bargain shares for under £2

Bilaal Mohamed takes a closer look at two of the cheapest shares available in the FTSE 250 (INDEXFTSE:MCX).

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Europe’s second largest travel firm Thomas Cook Group (LSE: TCG) updated the market this morning with its first quarter results to the end of December 2016. The group reported a solid financial performance with like-for-like revenue up by £14m to £1,618m. It was helped by growth in sales of holidays to Greece, Spain and long-haul destinations, together with new seat-only routes, offsetting the impact of reduced sales to Turkey and Egypt.

Growth in online bookings

Gross profit came in £4m higher than the same period last year at £357m, while the improvement of the gross margin by 10 basis points to 22.1% reflects the increased focus on own-brand and selected partner hotels. The company continues to focus on its strategy for profitable growth with online bookings up by more than 10% in the UK and by an impressive 40% in Germany, with its 24-hour satisfaction promise now extended to 250 hotels in long-haul destinations for winter 2016/17.

In its last set of full-year results, the company acknowledged that it had been a difficult year with profits dented by weaker consumer confidence in Germany and Belgium following the Brussels terror attacks. But it seems as if the early actions management took to shift its holiday programme into the Western Mediterranean and long haul have paid off, with revenue maintained at group level, thanks also to a stronger euro.

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Return of the dividend

Additionally, a focus on Thomas Cook’s own-brand holidays and partner hotels helped to deliver record profit margins in its UK and Northern European businesses. Management also decided to reinstate its dividends after an absence of five years with a payout of 0.5p per share. The dividend is due to be paid on 5 April (ex-dividend 9 March), and although the payout is modest, it reflects management’s confidence in its strategy to build sustainable and profitable growth.

The group’s share price has been drifting lower since the start of 2014, and Thomas Cook now trades on nine times forward earnings for the current financial year to September, falling to just seven for FY 2018. I think the difficulties the tourism industry is facing seems to be priced-in, and Thomas Cook could be worth buying as a long-term recovery play.

Attractive yield

Meanwhile, another troubled FTSE 250 company that’s seen its share price drifting lower over the last couple of years is SIG (LSE: SHI). The UK’s leading specialist distributor of insulation, dry lining and related products saw its share price surge last month. That was after a trading update for the year ended 31 December revealed that group sales had risen to £2.74bn, an 11.2% improvement on the previous year.

Numerous profit warnings have resulted in the share price plummeting over the past couple of years, boosting the dividend yield as a result. The Sheffield-based firm now offers a far more attractive yield that now stands at 4.1% and is covered twice by forecast earnings.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

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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.

Bilaal Mohamed has no position in any shares mentioned. 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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