If you’re looking to invest £5,000, or any other amount, into cheap UK shares today, there are plenty of options.
With that in mind, I’m going to take a look at five London-listed equities I think could be worth buying after recent declines.
Cheap UK shares to buy
The first company I want to highlight is B&Q owner Kingfisher. Shares in this company have charged ahead of the market over the past few months as it reported explosive sales growth. Consumers trapped in their homes by the coronavirus lockdown have been willing to spend money upgrading their properties. This has benefited B&Q.
However, despite the company’s relatively impressive sales performance, the stock continues to trade below 2019 levels. As such, I reckon it could be worth buying a share of Kingfisher as part of a base of cheap UK shares. Especially as the business continues to report faster sales growth than the rest of the retail market.
Another company that’s also reported explosive sales growth in recent months, but continues to trade at depressed levels, is Premier Foods. The owner of the Mr Kipling cakes brand saw sales jump in the coronavirus lockdown. Management has to be able to use this extra income to reduce debt and invest in marketing.
Premier has been struggling with high levels of borrowing for some time. So, the coronavirus crisis was somewhat of a godsend for the business. It’s now on a much more stable financial footing.
Despite this, the shares continue to look undervalued. They are changing hands at a forward price-to-earnings (P/E) multiple of just 9.4. That’s why I think Premier could be one of the best cheap UK shares to buy right now.
Home improvement
Another company that looks set to benefit from home improvement boom is door and window supplier Tyman. City analysts think this could be one of the few companies to report overall earnings growth in 2020. They’re forecasting earnings growth of 2% overall for 2020, followed by growth of 24% for 2021.
On this basis, it looks as if the stock is trading at a forward P/E of 9.5. Once again, this seems cheap compared to the broader market.
The government’s drive to get commuters to cycle to work rather than take public transport has been a boon for Halfords. The rising demand for cycling equipment has offset declines in other areas of business.
Based on this growth, City analysts reckon the stock is trading at a forward P/E of 8.8. That’s compared to the market average of 14. In my opinion, this valuation makes the stock one of the best cheap UK shares to buy right now.
Essential supplier
Finally, I don’t think any basket of cheap UK shares would be complete without including power plant operator Drax. This group provides an essential service for the UK, which has helped it ride out the coronavirus storm.
The stock is expected to support a dividend yield of 6.4% this year, with the payout covered 1.8 times earnings per share. Compared to the current interest rate environment, and the market average dividend yield of 3.4%, this distribution appears highly attractive. It also suggests the stock offers a wide margin of safety at current levels.
