I think there are plenty of bargains in the FTSE 250 at present. And with that in mind, I’m going to take a look at two cheap UK shares which I reckon would fit well into any portfolio.
Cheap UK shares
Virgin Money (LSE: VMUK) stands out to me as one of the most undervalued stocks in the FTSE 250 right now. The company, which is an amalgamation of Virgin Money and the CYBG Group, is one of the UK’s most recognisable challenger banks.
Over the past five years, the business has gone from strength to strength as it reinforced its position in the UK banking market. Virgin Money’s merger with CYBG made the group a force to be reckoned with, and analysts were predicting big things for business this year.
Unfortunately, the coronavirus crisis set back these plans, but I’m optimistic about the group’s outlook. The Virgin brand is recognisable around the world, and the group has one of the highest customer service ratings of any high street bank.
As such, I reckon the FTSE 250 stock has an attractive long-term outlook, and now could be an excellent time for investors to snap up a share of the business while it offers a margin of safety. The stock is currently dealing at a price-to-book (P/B) value of 0.3. This implies the stock could produce significant returns for investors when owned as part of a diversified basket of cheap UK shares.
FTSE 250 growth and value
As well as Virgin Money, I’ve also got my eye on pet retailer and veterinary business Pets At Home (LSE: PETS). Thanks to a boom in pet ownership during the first half of this year, the retailer is having a relatively good 2020. Demand for pets and pet products will help with the company’s earnings per share hit 15.2p in its 2022 financial year, according to analysts. That’s up from 14.7p in fiscal 2020.
Based on these projections, shares in the company are currently changing hands at a PEG ratio of 0.8, suggesting the stock offers a wide margin of safety at current levels.
Pets might not be as undervalued as other cheap UK shares, but the company’s growth is worth paying for, in my opinion. Management has also decided to keep the company’s dividend distribution in place. The stock is set to yield 2.3% this year as a result.
Overall, compared to other FTSE 250 stocks, I reckon Pets is an excellent long-term investment. The company’s national network of stores means it’s the first point of call for many pet owners.
What’s more, with pet ownership in the UK only increasing, demand for the company’s services should only grow in the long run. With this tailwind behind the business, I think it’s highly likely the stock will produce large total returns for investors over the next few years.
