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Despite the recent strong FTSE 100 rally, plenty of UK stocks are still trading at bargain valuations. I’ve picked out three that are flying but look cheap. Should investors consider buying them today?
The first that springs to mind is Barclays (LSE: BARC). Its share price is up 51% over 12 months, and almost 175% over five years.
Barclays shares are soaring
I’d expect a stock with that profile to be expensive as a result, but Barclays has a trailing price-to-earnings ratio of just 9.11. That’s well below today’s FTSE 100 average of around 18.
There’s a dividend too, although the trailing yield has been reduced by all that share price growth, and now sits at 2.57%. Despite that, Barclays plans to hand £10bn to shareholders between now and 2026, partly via dividends, but mostly through share buybacks.
No stock rises forever. If interest rates fall, that could squeeze Barclays’ margins. If rates stay too high they could squeeze the UK housing market, hitting mortgage sales and driving up loan impairments. Further trade tariff volatility won’t help. Yet I still think Barclays looks nicely priced for more excitement.
The next blue-chip bargain that jumps to my attention is British Gas-owner Centrica (LSE: CNA). While its share price is up a modest 10% in the last year, it’s rocketed a stunning 300% over five years. Yet it still trades on a P/E of just 8.22.
Centrica powers up
On 8 May, Centrica reiterated full-year guidance, while warning of losses at its Centrica Energy Storage+ subsidiary and lower than expected profits at Centrica Energy, amid “challenging market conditions” in gas and power.
It pays a modest dividend too, with a trailing yield of 2.88%. However, that’s forecast to hit 3.55% this year, with the full-year dividend set to climb from 3p per share to 5.5p.
As ever, Centrica is at the mercy of everything from weather to commodity prices, regulation and government policy. However, it should get a potential boost from an agreement with the government on the future of Rough gas storage, while broker JP Morgan anticipates “strong cash flow generation from existing businesses”.
Growth, dividends and a low P/E? There are risks, especially with energy prices down, but a lot to like.
My final low-P/E big winner is Imperial Brands (LSE: IMB). It fits the formula perfectly. Its shares are up 45% in 12 months, yet trade at a P/E of just 9.5.
Better still, it offers a trailing yield of 5.5%, so there’s plenty of income here, as investors have come to expect from the tobacco sector.
Imperial Brands is on fire
Its positive performance may surprise some, given the regulatory pressure big tobacco is under. Smokers remain a captive audience, while the group’s strong range of brands like Fortuna, Gauloises, Lambert & Butler, Rizla and Winston cement that loyalty. Imperial Brands is also making a big push into e-cigarettes.
Regulatory risks remain, obviously, and the shares may have risen too quickly, and could slow from here. They’re still cheap though.
At today’s low prices, all three stocks look well worth considering to me. With a long-term view of course.
