Are these cheap shares in the buy zone?

Although the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) may have managed to climb around 5% higher this year, the same cannot be said for all shares on the benchmark index.

Two shares which have fallen more than most are listed below. Are they too cheap to ignore now?

Super Retail Group Ltd (ASX: SUL)

The retailer behind brands such as Super Cheap Auto and Rebel Sport has seen its share price tumble almost 23% since the turn of the year. This has left the retail group’s shares changing hands at a lowly 11x estimated forward earnings and providing a trailing fully franked 5.8% dividend.

Although there are concerns about the impact Amazon will have on its business, similar businesses in the United States have managed to compete successfully. I expect Super Retail will have learned from their example and will continue its growth largely unabated. This could make its shares an absolute steal at the current share price.

Telstra Corporation Ltd (ASX: TLS)

At present this telco giant’s shares trade on an even lower multiple of 10x trailing earnings. I think this is great value for investors even when taking into account its dividend cut, the prospect of lower NBN margins, and the $3 billion gap in its future earnings.

While I don’t expect the company to be able to offset all of this earnings gap, I do think that the lucrative and fast-growing Internet of Things market will cushion the blow somewhat. Furthermore, I’m not really even convinced that the NBN is the future. If 5G internet ultimately offers superior speeds, I would sooner have that in my house than an NBN connection. This could offset weak NBN margins in the future.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited and Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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