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Looking for the best bargain stocks to buy in a Stocks and Shares ISA? Here are two UK shares I think might be too cheap to ignore.
Both trade on rock-bottom price-to-earnings (P/E) ratios and/or modest price-to-earnings growth (PEG) multiples. Value investors should give them serious consideration right now.
Springfield Properties
The FTSE 100 is the most popular places to go for investors seeking housebuilder shares. I own a handful of the index’s heavyweights (Barratt Redrow, Persimmon and Taylor Wimpey, if you’re wondering).
But today, my gaze has been drawn to AIM housebuilder Springfield Properties (LSE:SPR). This is because of the exceptional value it currently offers.
City analysts think annual earnings will leap 80% this fiscal year (to May). Consequently, it trades on a forward P/E ratio of 7.5 times. On top of this, Springfield’s corresponding price-to-earnings growth (PEG) ratio is just 0.1. Any reading below 1 suggests a share is undervalued relative to expected profits.
However, the cheapness of Springfield’s shares reflects ongoing uncertainty in the housing market. With the UK economy struggling and Stamp Duty rising for first-time buyers, worries over the industry’s resilience continue to swirl.
While nothing’s guaranteed, I’m optimistic the housing market will remain pretty solid, underpinned by further likely interest rate cuts in the coming months. My confidence is shared by Nationwide’s chief economist Robert Gardner.
Despite noting that average prices dropped 0.6% month on month in April, Gardner predicts: “Activity is likely to pick up steadily as summer progresses, despite wider economic uncertainties in the global economy, since underlying conditions for potential home buyers in the UK remain supportive.”
Although Springfield saw revenues fall 13% in the first half, it said in February that its private housing reservation rate is “experiencing signs of increased confidence following interest rate cuts“.
With extra rate cuts tipped for the coming months, I expect trading to keep improving.
Ibstock
Solid support for the housing sector also bodes well for FTSE 250 brick manufacturer Ibstock (LSE:IBST). This is another UK share I own in my portfolio. And I’m considering increasing my holdings given its excellent value for money.
For 2025, City analysts expect annual earnings to jump 25%. This leaves it trading on a sub-1 PEG ratio of 0.8.
Amid the broader housing market improvement, Ibstock’s also enjoyed a trading uptick in recent months. It said in April that “trading conditions improved in the first quarter compared to the prior year period, reflecting increased demand in new build residential construction markets“.
Again, trading conditions here are sensitive to interest rate movements. But I’m hopeful low brick demand may have bottomed out.
Like Springfield, I believe the company has considerable long-term investment potential as the UK’s growing population drives newbuild demand. This is underlined by the government’s pledge to build 1.5m new homes in the five years to 2029.
Despite near-term threats, and the drag of high energy costs on its operations, I think the brickmaker’s another top stock to consider.
