Many UK stocks continue to appear deeply undervalued to me. But don’t take my word for it, just look at the companies that have been snapped up at sizeable premiums this year: Spire Healthcare, Intertek, easyJet, and others.

Here are a pair of UK shares trading at very low forward-looking price-to-earnings (P/E) ratios right now. Nobody can say whether they’ll be also be acquired, or at what price, but they’re at least worth running the rule over.

Hostelworld

The first stock’s Hostelworld (LSE:HSW). For the record, I snapped up a few shares of the hostel-booking platform in June, at 108p each. As I write, they cost 113p, so I’m up only slightly. But at this price, Hostelworld trades at just 7.8 times next year’s forecast earnings.

Previously, I might have concluded that was about right for this stock. Because the company’s revenue growth had slowed to a snail’s pace following the pandemic, stoking fears that the market opportunity was tapped out.

But whereas the firm previously had one niche revenue source (just hostel bookings), it now has three:

• Core hostel bookings, enhanced by a marketplace bidding tool called Elevate.
• More accommodation types (budget hotels, guesthouses, etc).
• Social passes.

To my mind, the last one has interesting potential. Before, only bookers could get access to Hostelworld’s community features (direct messages, meet-ups, local events, etc). Now, it’s selling time-limited Social Passes to non-hostel travellers.

That’s useful for solo travellers, of course, as they can meet new people. For Hostelworld, it could help generate a high-margin income stream while reducing marketing costs as a percentage of total revenue. That’s because data shows community members book directly on the app more.

The biggest risk is rising inflation and/or a global economic slowdown, which could result in less travel. AI disruption fears also linger over all travel booking platforms (I think these are overblown though).

With earnings tipped to rise by double digits, and analysts’ price target 69% higher, I think this ultra-cheap stock’s worth considering. The icing on the cake’s a well-covered forecast 3.4% dividend yield.

Massive dividend

Speaking of income, Card Factory (LSE:CARD) might be worth opening up. Currently, it’s offering a huge 8% forecast yield, while trading at just five times forward earnings.

Why’s it so cheap? Well, the economic backdrop’s challenging for all retailers, and certainly adds a fair bit of uncertainty.

Meanwhile, cost inflation isn’t helping. Last year, Card Factory saw profits squeezed even as revenue increased 7.4% to £582.7m.

Despite this tricky environment, business is proving quite resilient (like-for-like sales were essentially flat last year). And the firm’s seeing success selling more of its own-manufactured cards to wholesale partners, both here and abroad.

The acquisition of Funky Pigeon also expands its footprint in the growing online greetings card market. Last year, Card Factory’s digital sales jumped 57%, suggesting this channel could offset any decline in in-store card buying over time.

Looking ahead, this year’s dividend’s expected to be covered 2.4 times by anticipated earnings. Therefore, a cut doesn’t seem likely to me, at least in the near term.

For bargains-hunters, the jumbo 8% dividend yield and super-cheap valuation make this stock worthy of further research. But if you’re unconvinced, this income stock might be more interesting…

What income stock do we like better than Card Factory Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Ben McPoland owns shares of Hostelworld.