A dirt cheap FTSE 250 stock to consider buying today

When exploring the FTSE 250, numerous shares are trying cheap proper now. The UK’s progress index doesn’t appear to be getting numerous love from buyers as sentiment surrounding the British economic system stays fairly weak. Nevertheless, regardless of investor attitudes, institutional analysts have began exploring the index for bargains. 

UBS has just lately described the FTSE 250 as being “in the suitable place, on the proper charge”, including the index to its ‘high funding concepts for 2025’ record.

So why are analysts turning bullish? And will Safestore Holdings (LSE:SAFE) be one of many largest bargains of the 12 months?

Capitalising on home progress

The UK economic system’s nonetheless struggling to meaningfully transfer in the suitable path by way of GDP progress. But with the federal government earmarking £100bn of funding by the Nationwide Wealth Fund, capital initiatives throughout infrastructure, healthcare, vitality, and homebuilding are set to ramp up over the subsequent 5 years.

For reference, that’s roughly the equal of three.7% of GDP. And since small- and mid-cap shares, like these discovered within the FTSE 250, are sometimes intently tied to home demand, a lift to financial progress may show to be a strong catalyst for positive factors. Or as UBS places it: “For these trying to ‘wager on Britain’ amid a posh international backdrop, the FTSE 250 gives a novel mix of resilience and progress potential”.

A discount?

Safestore Holdings sits comparatively comfortably in the direction of the center of its guardian index with a market-cap of £1.3bn and a share worth hovering round 610p. But when put next to its earnings, the stock’s buying and selling at a dirt cheap price-to-earnings ratio of simply 3.6!

The self-storage operator is presently navigating by unfavourable market situations. With households staying put in homes longer than in earlier years due to increased rates of interest, client demand for self-storage has suffered.

In the meantime, small- and medium-sized enterprises (SMEs) that make up the majority of Safestore’s company purchasers additionally seem to be in a money-saving mode. In reality, card fee processor Dojo just lately carried out some analysis and found that 30% of SMEs are battling monetary stress, due to inflation and better rates of interest.

With that in thoughts, it’s not too stunning that income and earnings have taken a success, dragging the share worth within the improper path. But following its newest quarterly outcomes, the worst could be over. The UK self-storage market seems to be slowly recovering, returning Safestore again to modest progress and better like-for-like occupancy. If this development continues, it might not be lengthy earlier than the Safestore share worth begins shifting in the suitable path.

In fact, recoveries can take longer than anticipated. Adjustments to Nationwide Insurance coverage contributions for companies imply Safestore’s doubtless to see a 7-8% rise in working prices, hitting margins. As such, the British self-storage business could have to make significantly extra progress earlier than Safestore’s backside line returns to progress mode.

However, in the long term, I stay cautiously optimistic about this FTSE 250 stock, particularly at its present valuation, which I really feel is value contemplating. That’s why it’s already in my portfolio.