As the ISA year end approaches, many investors will be looking for ways to put their money to work, identifying stocks that combine valuation support with growth or income potential.
And for me, two names that still stand out on valuation metrics are Jet2 (LSE:JET2)and TBC Bank Group (LSE:TBCG).
Jet2
Jet2, the UK-listed leisure travel and package holiday operator, is such an interesting proposition. And that largely revolves around the valuation. Of course, this should be the case for any investment, with the exception of companies that are valued according to long-term aspirations, which are hard to quantify, like Tesla.
What’s so great about the valuation? Jet2 trades around 6.2 times forward earnings. Adjust that for £800m of net cash, the figure falls to around 4.3 times. This puts it at a vast discount to its peers. In fact, the average of all major UK operators is around 9.5 times.
Caveats? Well, it’s a low-cost airline and margins are often lower in this part of the market. Lower-margin companies typically command lower valuations because there’s a greater risk of slipping to a loss when times get hard. It’s also operating an older fleet. Although this should change and positively impact margins.
What’s more, earnings will plateau over the next 18 months as it invests in its new Gatwick hub. However, I’d expect fairly solid earnings growth thereafter, assuming oil prices haven’t surged and passenger demand hasn’t dropped off a cliff.
Personally, I’m also wondering whether the motor finance compensation scheme will put a few extra pounds in holidaymakers pockets. Typically, when we received unexpected money, we do things like book holidays. And this adds to my optimism.
In short, I certainly think this is one worth considering.
TBC Group
TBC Bank Group provides universal banking and financial services principally in Georgia, with operations also in Uzbekistan .
Once again, this is a valuation piece. At 5.4 times forward earnings, it’s trading at a considerable discount to UK peers and its Georgian counterpart Lion Finance. Coupled with a 6.2% dividend yield, it’s certainly not expensive.
It’s also one of the fastest growing companies on the UK stock market. Forecasts suggest it will grow earnings by 17% annually over the next two years and earnings by around 11%.
The risks here are very much operational. TBC’s Uzbekistan wing is a digital powerhouse with 22m users, however, aggressive Basel III regulatory compliance demands higher capital provisions. A strategic pivot from high-margin microloans to competitive SME lending could squeeze short-term profitability.
Despite this, the Georgian business remains reliable and the Uzbek business looks increasingly flexible. With the metrics above in mind, I absolutely believe the stock still looks cheap.
Like Jet2, I think investors should consider this stock in February.
