Here are three cheap shares I’d buy today and compound my gains towards getting rich and retiring early.
Fast-growing challenger law firm Keystone Law (LSE: KEYS) may not look cheap in terms of its valuation. Indeed, with the share price near 441p, the forward-looking earnings multiple for the trading year to January 2022 is around 31.
However, I reckon it’s cheap compared to its growth prospects. Earnings have been increasing at a brisk double-digit percentage annual rate for the past few years with a short-term interruption because of the Covid-19 crisis. And the share price is also cheap compared to its pre-coronavirus high of 615p.
I reckon the stock has every chance of returning to its highs and beyond, driven by strong progress in the underlying business. But we haven’t heard from the firm for a while. It’s due to update the market with its half-year results on 14 September. It seems to me the shares have been easing back leading up to this announcement.
Nervous investors may wait to see what the results report contains before taking the plunge with the shares. But if you’re investing with a multi-year holding period, I reckon this stock is worth considering right now.
Recovery and growth potential
There’s a buzz around fast-moving consumer goods (FMCG) provider PZ Cussons (LSE: PZC). After years of falling, the share has turned around and is moving up again after bottoming in the spring with the coronavirus crash.
I reckon the share-price recovery is anticipating improvements in the underlying business. Indeed, revenue, earnings and cash flow had been falling for around five years and the valuation shrank to accommodate the firm’s lacklustre prospects. I reckon poor-performing operations in Nigeria had been discounted by the market.
However, the recent disposal of Nutricima demonstrates the company has options for dealing with its under-performing divisions. As well as selling them it can choose to close them down. Or it can execute a turnaround, which could help drive the share price higher.
Meanwhile, new experienced FMCG chief executive Jonathon Myers hit the ground running in May. And turning around the company’s fortunes is bound to be top of his agenda. I think he has a lot of quality raw material to work with, and the rising share price now anticipates his success. I’d buy the stock.
Quality – full stop!
Soft drinks supplier Britvic (LSE: BVIC) is staging a steady climb back towards its pre-coronavirus level. In February, the shares were trading at about 930p and are now changing hands for around 860p, as I write.
The firm had a ‘good’ crisis because it kept trading and suffered relatively small short-term declines in revenue, cash flow and earnings. City analysts have pencilled in a robust bounce-back in earnings for the trading year to September 2021.
The share isn’t cheap in terms of valuation. For example, the forward-looking earnings multiple stands near 16 for next year and the anticipated dividend yield is around 3.2%. But the company has earned its full rating because of the quality of its business. There’s a long record of consistent, profitable trading, and operations occupy a defensive sector.
To me, the share’s cheap compared to its long-term prospects. I’d buy the stock today and hold for at least 10 years with the full expectancy of a happy investment outcome.
Kevin Godbold owns shares in PZ Cussons. The Motley Fool UK has recommended Britvic and PZ Cussons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.