2 UK shares for value investors to consider buying

Value investing is about finding opportunities to buy stocks when they are extremely cheap. But it’s not always easy.

At the moment I think there are a few UK stocks worth taking a look at. At first glance they don’t look like a bargain, but closer inspection suggests they could be a value.

Carnival

Many of the best-performing UK companies over the last few years are recovery stories from Covid-19. But the cruise line business Carnival (LSE:CCL) wasn’t one of them.

The company’s shares are still down 62% from five-year-ago levels as the company’s profits have not recovered from the pandemic. The main problem is the company’s debt burden on its balance sheet.

As a result, the company is paying around £1.3 billion in interest costs per year compared to £142 million in 2019. There is a risk that it will have to issue shares to repay its liabilities.

The good news, however, is that interest rates are starting to fall. This should help reduce the impact of Carnival’s debt on its earnings and free cash flow.

The company’s shares are currently trading at a price-to-earnings (P/E) multiple of around 14. Looking beyond the volatile years surrounding the Covid-19 pandemic, this isn’t an unusually high performance for the stock.

If an improving balance sheet can lead to higher earnings in the future, Carnival stock could be a great value. I certainly think this investment is worth taking a closer look at for value investors.

Ibstock

With a P/E ratio of 101, FTSE250 brick company Ibstock (LSE:IBST) doesn’t look like a bargain. However, a closer look at the business reveals a slightly different picture.

Ibstock’s earnings per share fell from 22p to 2p from 2022. That’s why the P/E multiple is high, even though the company’s stock is down 20% over the last five years.

The main reason is poor construction production in the UK. The question for investors is whether this is cyclical or sustainable – and I think there is reason to believe it is the former.

House prices in the UK are rising at their fastest pace in three years. This could be a big incentive for home builders, leading to greater demand for bricks and other materials.

One potential threat to Ibstock is the possibility of house building techniques changing to be less reliant on bricks. There are some signs that this is happening elsewhere, particularly in Europe.

Overall, the company looks set to benefit from a recovery in construction, but the share price likely doesn’t reflect this. That’s why I believe this is a stock for value investors to consider.

Valuable opportunities

In most cases, stocks are cheap for a reason – it’s because there are ongoing problems with the underlying businesses. This is one of the risks of value investing.

However, in the case of Carnival and Ibstock I don’t think this is the case. They’ve both faced challenges recently, but I think there’s a good chance they’re temporary.

It’s hard to predict when exactly things will start to pick up again. However, if this happens, current prices could represent a good opportunity for investors looking for long-term profits.