The STV Group (LSE: STVG) share price has slipped sharply since the beginning of September. But it’s a decline I think makes this small-cap a very attractive, cheap UK share to buy. It leaves the Scottish broadcaster trades on a forward price-to-earnings (P/E) ratio of 9 times. At current prices, STV carries a chubby, inflation-beating 2.9% dividend yield as well.
Soaring expenditure in Britain specifically is what makes STV such an attractive pick, in my opinion. According to marketing strategists WARC: “The UK is on course to achieve the fastest ad trade recovery of any major European market this year, and one of the strongest growth rates across 100 global markets.”
I’m expecting STV to release more sunny financials on the back of this ad market recovery, providing the possibility of a sharp share price rebound. The company’s most recent trading update showed that “advertising trends continue to improve through 2021” and that total advertising revenues were up 32% year-on-year in the first half. Encouragingly, ad sales were also up 5% from the same period in 2019.
I don’t just think STV’s a top buy for the economic recovery over the short-to-medium term however. I believe the cheap UK share’s massive investment in the fast-growing ‘video on demand’ (VOD) segment isn’t baked into the current share price of 336p.
Its STV Player platform is the fastest-growing streaming service in Britain, with streams rising 94% year-on-year between January and June. The business just signed its largest-ever content deal to keep VOD viewers switched on too.
I think STV’s one of the best cheap UK shares to buy, despite the intense competitive threat from the likes of Netflix and Amazon’s Prime service and free platforms like BBC iPlayer. City analysts think earnings here will edge 2% higher in 2021 before growth accelerates to 12% next year.
Another cheap UK share on my radar
Bellway (LSE: BWY) appears to be another great bargain for growth and income, now and in the future. City brokers reckon earnings at the housebuilder will soar 117% in 2021 and then rise by an additional 8% next year. This leaves the FTSE 250 firm trading on a forward P/E ratio of just 10 times.
What’s more, at a current price of £35.20 per share, Bellway carries a forward dividend yield of 3.2%. It’s one that smashes the FTSE 250 average of 1.8% to matchwood.
Bellway’s shares have risen strongly over the past year as home sales have rocketed. Still, it continues to command a low valuation as fears over property demand as Stamp Duty is reintroduced persist. This is a real threat but as an investor in the housebuilding sector myself, I continue to find news on this front encouraging.
Latest Halifax data this week showed average home values rise 0.7% in August to fresh record peaks. This was despite Stamp Duty becoming payable again for all properties above £250,000.
I already own shares in Barratt and Taylor Wimpey. And while demand for its new-builds could suffer if the economic recovery stalls, I’m thinking of snapping up Bellway shares too due to its rock-bottom share price.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild owns shares of Barratt Developments and Taylor Wimpey. The Motley Fool UK owns shares of and has recommended Amazon and Netflix. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.