Is there a golden shopping for alternative in these low-cost shares?

I’m on the prowl for affordable shares so as to add to my portfolio in March. The drawback is many share costs aren’t as little as they had been just a few brief weeks in the past. That’s as a result of the UK inventory market has been rising.

The FTSE 100 topped 8,000 factors for the primary time final week, having fun with its day – or perhaps summer time? – within the solar after years of underperformance. Likewise, the domestic-focused FTSE 250 has bounced again from its depressing 2022.

So my bargain-hunting has led me to small-cap shares. And Epwin Group (LSE: EPWN) has caught my eye.

Discounted inventory

Epwin is a UK-based door and window producer. It makes and markets PVC and aluminium home windows, in addition to cladding, decking, and different related merchandise. The agency provides the repairs, upkeep, and enchancment, new construct, and social housing sectors. It has a big community of retailers, plastics stockists, and window and door installers.

Its shares are listed on the Alternative Investment Market (AIM). At 78p a share, the corporate sports activities a market cap of £113m.

The share worth has declined 26% during the last 12 months. That leaves the inventory buying and selling on a price-to-earnings (P/E) ratio of round 8.4. That’s about half the market common P/E, in line with my information supplier.

Yet there’s nothing within the financials suggesting to me that such a big low cost is warranted. Far from it, in reality.

Robust buying and selling

In its year-end buying and selling replace printed final month, the group reported that income elevated 8% yr on yr to roughly £355m. This was largely pushed by elevating costs to cowl price inflation, in addition to bolt-on acquisitions accomplished within the yr, which contributed £4m in income.

As a outcome, the corporate expects to report annual adjusted revenue earlier than tax of about £16.3m. That’s in keeping with market expectations, and a rise over 2021. 

I’m inspired that the corporate is efficiently demonstrating its capacity to extend costs and protect income. After all, it’s no secret that the macroeconomic atmosphere has been difficult for a lot of UK-focused companies.

The inventory pays a dividend, with a present yield of 5.4%.

Optimism and uncertainty

Management additionally introduced that buying and selling in 2023 has remained strong to this point. It stays assured of continued worthwhile development over each the medium and long run. 

A core a part of Epwin’s development technique is to finish selective, value-enhancing acquisitions. It’s been busy on that entrance lately, shopping for Hampton Decking (a personal composite decking firm) for round £4m in December. It additionally acquired PVC-recycling agency Poly‐Pure again in September for an preliminary money consideration of £15m.

Of course, the corporate is dealing with headwinds working in a sluggish and unsure UK financial system. But I feel that uncertainty might be already priced into the inventory. It could also be low-cost, however I feel there’s worth right here.

Looking ahead, analyst consensus for this yr is for over £360m in gross sales, round £20m in income, and a dividend of 5.0p per share. If that payout was met, which isn’t assured, that might symbolize a ahead dividend yield above 6%.

All issues thought-about, these low-cost shares look enticing sufficient to go on my March purchase checklist.