2 value stocks down 35% that look too cheap to me

Value stocks don’t always have to be dusty banks or cobwebbed commodity giants. Sometimes entire parts of the market get dragged into the value bucket, as has happened recently with software.

Also, partly because of higher interest rates, UK small-cap shares have been battered. The end result is some really cheap-looking tech stocks today.

Here are two that I think are worth a closer look.

A new revenue driver

As the name suggests, Hostelworld (LSE:HSW) is a platform where people can book hostels worldwide. But this is a niche area, as many travellers don’t want to share a six-bed dorm with snoring strangers.

On the other hand, most solo travellers would like to meet like-minded people, and this is what Hostelworld has started facilitating through its social network.

People can now buy passes to access the app, chat, and arrange meet-ups, regardless of what accommodation they’re staying in. This opens up a new high-margin revenue stream.

The good news is that after falling 35% in a little over two years, the stock looks very cheap today.

This translates into a price/earnings-to-growth (PEG) ratio of just 0.2. As a reminder, anything below 1.0 is seen as potentially undervalued.

Of course, a risk here is an escalation in the Middle East conflict, as this could impact global travel and booking volumes.

But with a massive amount of third-party inventory (budget hotels, guesthouses, and homestays) recently added to the platform, the future looks bright for Hostelworld.

Note, there’s a very well-covered 3.2% forward dividend yield here too.

We enter 2026 not simply as a hostel OTA, but as a social travel platform with three areas of revenues, a materially larger addressable market, and a proprietary dataset spanning 3.4m members, 16m chat messages and 17m bookings, that no competitor can replicate.
CEO Gary Morrison.

Highly scalable network

Boku (LSE:BOKU) is a mobile payments company that allows global tech giants (including Amazon and Netflix) to accept localised payment methods (LPMs) like digital wallets and direct carrier billing. It now facilitates over 300 LPMs worldwide.

Revenue growth has been brisk, going from $63.8m in 2022 to an expected $154m this year. And the fintech’s asset-light model is really starting to shine, with net profit expected to more than triple between 2025 and 2027.

After sliding 35% since October, the stock also looks cheap, according to the forward-looking P/E multiples below.

Again, perhaps the PEG ratio displays this best. Based on these forecasts, the shares trade on a three-year PEG of just 0.31.

Unsurprisingly, management thinks the current share price “undervalues the company“. Little wonder then that the debt-free fintech has been buying back shares this year.

Risks to growth include stiff competition in local payments and potential adverse regulatory change in its markets. Also, the loss of a big merchant like Spotify would be a body blow.

Again though, this stock looks too cheap to me today. After all, Boku is facilitating the growth of Western tech giants as they expand into emerging markets across Asia, Latin America, and Africa, where consumers prefer LPMs.  

This makes me believe that Boku’s commitment to 20%+ annualised revenue growth over the medium term is achievable. Analysts are certainly onside, as the 12-month price target is 92% higher at 304p.

Should you invest £5,000 in Boku right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Boku made the list?

Ben McPoland has no position in any of the companies mentioned.