3 cheap UK stocks to consider as the summer holidays approach

UK stocks are up, with FTSE 100 closing higher every year since Covid. Performance has slowed recently in the run-up to the general election, but overall sentiment for the second half of 2024 remains positive.

This suggests that there are still some cheap buying opportunities to consider in our local market. Here are three stocks that I think will see growth this summer.

WH Smith

WH Smith (LSE: SMWH) has yet to recover to its pre-Covid-19 levels, so a busy summer could be just what it needs. The newsagent and travel retailer has recently increased the number of its stores in train stations and airports. With travel expected to increase during the summer holidays, these stores should benefit from increased footfall.

The retailer may want to focus on paying down its debt, though. At £481m, its debt is higher than both its cash and equity. Interest payments are adequately covered for now, but it would have more money to spend if it reduced its debt. If the summer doesn’t give it the boost it needs, price growth could be held back.

Since July 2021, the stock price has fallen by 30%, but analysts’ forecasts remain favorable. Earnings are expected to grow at a rate of 24.7%, giving it a price-to-earnings (PEG) ratio of 0.9. And return on equity (ROE) is expected to reach a very promising 27% in three years.

Wizz Air

As the UK prepares for one of its wettest summers on record, travellers will be scrambling to get cheap tickets to sunny European shores. The little sister of the UK’s budget airlines, Wizz Air (LSE: WIZZ) continues to operate in the shadow of easyJet And RyanairIt may struggle to compete with Ryanair on prices, but its customer service is better rated. And with a price-to-earnings ratio (PE) almost half that of easyJet, it has much more room to grow.

But that’s not all: estimates of future cash flows suggest that the current share price could be undervalued by almost 75%. My only concern is the €1 billion of debt it holds, far more than its €145 million of equity. While cash reserves are sufficient to cover this, the cost of reducing this burden could limit the financing of future expansion. Let’s see if the summer can bring some respite.

Pets at home

One of the UK’s favourite success stories, this beloved pet store has enjoyed spectacular success during Covid. Bored owners have turned their attention to their pets during lockdown, ordering toys and pampering gifts from Pets at home (LSE: PETS) online store.

But life has returned to normal and the dream of working from home has died, and playtime has ended. Shares are now down 43% since their September 2021 peak. Plus, its success has attracted competition and fickle consumers may be drifting away, so Pets at Home may need to cut its high prices to retain customers. In May 2023, it launched a bold rebranding strategy, but the price has since fallen 20%. While the economy may be partly to blame, there is also little evidence that the plan worked.

Still, people still have pets, and what better time than summer to pamper them? With the economy recovering and the stock price returning to pre-pandemic levels, business should return to normal. The stock was already doing well before the pandemic, so there’s every reason to believe it could regain that success.