I am looking for cheap FTSE 250 shares to buy today for my portfolio following the recent market volatility.
There are three companies that really stand out to me as being undervalued growth stocks right now. I would add all of them to my portfolio.
FTSE 250 shares to buy
The first company on my list is the food group Premier Foods (LSE: PFD). At the time of writing, the stock is trading at a forward price-to-earnings (P/E) multiple of 8.3. However, analysts think the business will report earnings growth of around 17% in 2022. On that basis, I think the stock is undervalued.
Some challenges it could face going forward include higher ingredients costs. These could put pressure on the company’s profit margins and slow growth.
Still, after around a decade of restructuring its balance sheet, cutting costs and expanding into new markets, I think the establishment has tremendous potential over the following 10 years as it embarks on its next stage of growth.
Management is investing heavily in marketing and infrastructure to help expand its footprint and reach new consumers. This is not reflected in the company’s current valuation.
Growing in a niche
It has a strong reputation with its clients, which has helped it grow steadily over the past five years. Revenues have increased at a compound annual rate of 7% per annum since 2016. Going forward, the company is looking to capitalise on this. It should also benefit from rising interest rates.
That said, the business is exposed to the UK economic environment. Therefore, if the economy slows substantially, revenues may come under pressure.
Despite this risk, I think the stock looks undervalued compared to the group’s potential and niche operating model. The shares are selling a forward P/E of 8.7 and offer a dividend yield of 5.8%. Once again, I think this valuation undervalues the company’s competitive strengths and growth potential.
Financial services group Plus500 (LSE: PLUS) specialises in offering trading services to retail clients. It should benefit from the current stock market volatility as it takes a tiny slice of each trade.
Despite its competitive advantages and position in the market, shares in the company are selling at a forward P/E of just 8.1. I think this significantly undervalues the FTSE 250 retail trading giant.
The stock also offers a dividend yield of 4.9% and management has been returning cash to investors by repurchasing shares over the past couple of years.
Some of the main challenges the company may encounter going forward include regulatory risks and competition. The market is highly competitive, and complying with regulatory requirements can be expensive.
Even after considering these challenges, I think the stock looks incredibly undervalued.
Are you on the lookout for UK growth stocks?
While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.
And the performance of this company really is stunning.
In 2019, it returned £150million to shareholders through buybacks and dividends.
We believe its financial position is about as solid as anything we’ve seen.
Since 2016, annual revenues increased 31%
In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
Operating cash flow is up 47%. (Even its operating margins are rising every year!)
Quite simply, we believe it’s a fantastic Foolish growth pick.
What’s more, it deserves your attention today.
So please don’t wait another moment.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.