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Cheap stocks come in all shapes and sizes. A share costing £100 might well be dirt-cheap, while one priced at 10p could prove to be grossly overvalued. Here, I want to highlight a pair of cut-price stocks that I think are worth considering as buys.
UK growth stock
First up is Ashtead Technology (LSE: AT.). This AIM-listed small-cap stock has had a rough time, slumping 49% over the past year. Yet, it’s still up 187% since listing in late 2021, which is testament to the company’s solid growth.
Ashtead Technology is a subsea equipment rental and solutions provider for the global offshore energy sector. Its business spans both oil and gas and renewables, with 85% of its equipment transferrable between the two.
This gives the firm flexibility and the chance to capitalise on trends in both areas. For example, the decommissioning of oil and gas infrastructure, or the building of wind turbines. A serial acquirer, the company has amassed a rental fleet of over 30,000 assets.
Revenue growth has been strong, rising from £42.4m in 2020 to an expected £228m this year. Profits have also motored higher and the £370m firm sports an attractive 25% operating margin.
The key risk here is that a global economic downturn could lead to less demand for Ashtead Technology’s services. There’s also weak sentiment for the renewables sector right now (an important growth market for the firm).
For instance, green energy giant Ørsted has pulled out of the UK’s massive Hornsea 4 offshore wind project in its current form due to high costs. Ørsted’s share price, by the way, is down 64% in five years!
This is why Ashtead Technology’s flexibility and geographic diversification is an advantage. Its fate is not tied to North Sea oil and gas or UK renewable energy policy. It has facilities located in key offshore energy hubs in Europe, the Americas, the Middle East, and Asia Pacific.
After its fall, the stock is trading at 9.5 times forward earnings and has a P/E-to-growth (PEG) ratio of 0.5. These metrics look attractive, even if the company’s earnings won’t grow as quickly over the next couple of years as they have in the past.
US tech giant
The second cheap stock is Alphabet (NASDAQ: GOOGL). The Google owner’s share price is down 20% since the start of February.
Investors have been fretting about the changing landscape in internet search, with AI-powered chatbots rapidly gaining in popularity. This is obviously a key risk that Alphabet is attempting to navigate, as 56% of revenue came from Google’s search business in Q1.
However, it’s unlikely that traditional search engines are going to disappear overnight. Google has been incorporating AI summaries into search, which it says is boosting engagement. It also has its own AI chatbot, Gemini, and I expect it to monetise that with ads in future.
Meanwhile, YouTube is going from strength to strength, as is Google Cloud (it grew 28% in Q1, bringing in $12.3bn). And its Waymo robotaxi business is launching in more cities in 2025 and 2026. Google is also making progress in quantum computing research.
Right now, Alphabet shares can be picked up for 17.6 times forward earnings. I see a lot of value for long-term investors, despite the scary headlines predicting Google’s imminent demise.
