2 cheap UK shares I’d buy before the end of 2022

I’m always on the lookout for cheap UK shares that I can add to my portfolio. As 2022 draws to a close, there are two in particular that I have my eye on.

ITV

Shares of ITV (LSE:ITV) have fallen by around 30% in the last year. The broadcaster’s share price currently sits at just under 74p.

The bulk of ITV’s price drop since last year happened in a single day. The price dropped 30p on 3 March. However, this wasn’t due to worrying financial results.

The price dropped based on speculation that ITV won’t be able to compete in the streaming space. In the last year, the company spent more on content for its digital services than previously forecasted. This investment was part of an effort to “supercharge” ITV’s streaming service, which culminated in the launch of its new ITVX platform this quarter.

ITV will continue to invest more in its digital content, but this doesn’t concern me. ITV’s core business has always been in traditional television. However, TV viewership is rapidly declining as people move towards on-demand streaming subscriptions.

Deloitte estimates that traditional TV’s share of viewing hours in the UK will drop to below 50% for the first time in 2023. I’m only now looking at buying ITV shares because the company is investing heavily in streaming.

Financially, ITV is in great shape. The price-to-earnings (P/E) ratio is a very attractive 6.2, revenue is up 24%, and net profit is up 32%. ITV shares also have an average 12-month target price of 91p.

It sure looks undervalued to me.

International Distribution Services

Shares in International Distribution Services (LSE:IDS), the owner of Royal Mail, are trading at less than half what they were a year ago. The company’s share price has steadily declined over the last 12 months.

That decline has intensified since the start of this month as Royal Mail bosses failed to stop workers from going on strike.

I’m looking at IDS shares now precisely because the strikes are bringing down the share price. Sooner or later, the strikes will end with an agreement that brings employees back to work.

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Once that happens, the share price could stabilise or continue to fall. My hope is that the price will stabilise and maybe even begin to increase again.

Financially, IDS should be able to meet the striking workers’ demands. Net profit is up around 285% since 2020; in fact, the net profit for 2021 and 2022 is more than the combined net profit from 2016-2020.

The current chaos surrounding the strikes is terrible for Royal Mail’s short term business. However, I don’t see it having a significant long term impact.

IDS currently has a P/E ratio of 7.9 and dividend yield in the 8% range. That makes me comfortable with investing in the company, even if I’m wrong about the turnaround timeline for the share price.

In summary, if I find myself with the spare cash in December to afford shares in these two British institutions, I’ll be snapping them up without hesitation!

The post 2 cheap UK shares I’d buy before the end of 2022 appeared first on The Motley Fool UK.

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Matt Cook has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.

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