Why these 3 dirt-cheap stocks could enhance your investment returns

Updated: 
Barratt Developments Camden Courtyard

While finding cheap shares may be more difficult following the FTSE 100's bull run, bargain opportunities are still on offer. Here are three stocks which could be worth buying right now.

Growth opportunity

With the UK housing market continuing to provide an asymmetrical risk/reward opportunity, Barratt Developments (LSE: BDEV) could prove to be a sound investment opportunity.

The company is expected to report a rise in its bottom line of 9% in the current year. With a price-to-earnings growth (PEG) ratio of just 1.1, it offers a wide margin of safety and could deliver strong capital growth over the medium term.

Part of the reason for its bright outlook is it benefits from high customer satisfaction scores. This could lead to an enhanced reputation among potential customers and even create higher margins and better sales in the future.

Certainly, the UK housing market faces an uncertain future due to the risks posed by Brexit. However, with a strong balance sheet, low valuation and excellent business model, Barratt could deliver improved investment returns in the long run.

Buying opportunity

Despite falling by 8% following the release of an operations update, oil and gas company Serica(LSE: SQZ) could prove to be a sound long-term buy. Its share price fell because it amended its full-year production guidance in response to an opertions delay.

The company's Erskine production platform is expected to resume later than anticipated, since the operator of the Lomond platform has advised it that de-waxing procedures will take longer than anticipated.

Despite this, Serica expects production to pick up as soon as the current restrictions are resolved. It also has a healthy cash balance following the acquisition and it has a clear plan to grow production and move its Columbus plans forward.

Trading on a PEG ratio of 0.9, the company appears to offer a wide margin of safety. While its outlook is uncertain and volatile, it could prove to be a sound investment for less risk averse investors in the long run.

Potent mix

Also offering upside potential at the moment is Standard Life Aberdeen(LSE: SLA). The merged entity has a dominant position within its markets, and this could lead to higher margins and greater efficiencies in the long run. It also means that the business may now offer a more stable outlook which could mean it is able to command a higher valuation in future.

With the company expected to report a rise in its bottom line of 8% in the next financial year, it seems to be performing well. It trades on a price-to-earnings (P/E) ratio of 14.5, which suggests there is scope for an upward rerating over the medium term.

Standard Life Aberdeen also has strong income prospects. The company offers a dividend yield of 5% from a payout which is covered 1.4 times by profit. This suggests that there is the potential for a higher dividend in future. This could act as a positive catalyst on investor sentiment given the prospect of higher inflation over the medium term.

What about Brexit?

Looking ahead, fear and indecision could hurt share prices in the coming months. That's why the analysts at The Motley Fool have written a free and without obligation guide called Brexit: Your 5-Step Investor's Survival Guide.

It's a simple and straightforward guide that could help you to find the best stocks during the Brexit process. They could boost your portfolio returns in 2017 and beyond.

Click here to get your copy of the guide - it's completely free and comes without any obligation.

Peter Stephens owns shares of Barratt Developments and Standard Life Aberdeen. The Motley Fool UK has recommended Standard Life Aberdeen. 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