Market volatility in recent days and weeks has left plenty of top-class UK shares looking seriously undervalued. Here are several penny stocks that have fallen sharply in value of late. I think they could be too cheap for me to miss.
A top contrarian share to buy
Recruitment and training business Staffline Group (LSE: STAF) has fallen to its cheapest for a year in recent sessions. As I type, it remains 9% lower than it was 12 months ago too. Investors have been selling because of fears that soaring inflation will derail the economic recovery and, by extension, the labour market.
This is a risk investors like me need to take seriously, though encouraging news surrounding the jobs market is helping to soothe my fears. And so I’m considering buying Staffline shares following the recent dip.
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Last month the penny stock lauded its “strong new business pipeline” and said that important sectors like automotive, manufacturing, aerospace and travel are expected to continue recovering in 2022.
Since then, the Recruitment and Employment Confederation (REC) has echoed the positive outlook for the jobs market too. This week, it said hiring intentions for both permanent and temporary staff have continued to improve in recent months.
It might not all be plain sailing for Staffline however. The recruiter could suffer if labour shortages leave it with a lack of candidates to market. However, I still believe the possible rewards of me owning this particular penny stock outweigh the risks.
At current prices of 52p per share Staffline trades on a forward price-to-earnings (P/E) ratio of just 11 times. This offers serious value for money, in my book.
Another dirt-cheap penny stock
Building products manufacturer Brickability Group (LSE: BRCK) has also fallen sharply in recent days. And, like Staffline, it also offers attractive value for money today. At 93p, the business trades on a forward price-to-earnings growth (PEG) ratio of 0.3. This is well below the benchmark of 1 that suggests a stock could be undervalued.
Brickability’s share price has dropped 7% in value in just the past seven days. It’s slumped amid broader risk aversion on financial markets and fears that central bank action in the months ahead could hit demand for its product. Higher interest rates usually translate to a slowing of the housing market.
It’s still important to remember that Brickability’s shares are still more than a third more expensive than they were a year ago. This is because the outlook for UK house prices remains rock solid despite the risk created by higher interest rates. Indeed, Brickability said last month that its order book reflects the sense of optimism in the housebuilding industry.
I’m confident that lending conditions for first-time buyers will remain ultra supportive for years to come. And as a consequence, I think home construction levels will need to pick up to accommodate them.
Against this backdrop, I think brickmaker Brickability could deliver terrific profits for its shareholders.
