2 cheap FTSE 100 shares to consider buying in June

How do we tell if a FTSE 100 stock looks cheap? One way is to seek out share prices that have fallen this year, and that brings Associated British Foods (LSE: ABF) into view.

The shares are up from their 52-week low in March, but we’re still looking at a 12-month fall of 20%.

Too many pies?

Some of the weakness has to be down to retail fears facing the company’s Primark high street chain. We also have at a collection of five different business here, with Grocery, Ingredients, Sugar, and Agriculture divisions added to Retail.

That brings diversification, which is a good thing. But it can also suggest a company lacks focus, and top management have to keep their eyes on numerous balls.

With first-half results in April, CEO George Weston said he was “frustrated with the results in our Sugar business.” But the other four are doing fine, in line with full-year guidance. The update gave the share price a boost at the time.

The future

Forecasts indicate a fall in earnings per share for the full year, and that has to be holding the stock back. But analysts expect a return to earnings growth that could drop the price-to-earnings (P/E) ratio to under 9.5 by 2027.

Associated British Foods had net debt of £2.8bn at 1 March, up from £2.5bn a year previously. Against a market cap of nearly £15bn, that doesn’t worry me too much. But it’s worth keeping an eye on.

There’s risk from retail exposure, and a possibly perceived lack of focus. But I think long-term investors should consider it.

Valuation

Looking for FTSE 100 stocks on low P/E valuations can also throw up candidates. And that draws my attention to M&G (LSE: MNG). M&G seems to come up in a number of my searches on different factors, like its big 8.3% forecast dividend yield.

There’s a forecast P/E of 10 on the cards for the current year. And a mooted recovery from the past couple of tough years could see it drop close to eight by 2027.

Investment management companies are often on lower P/Es and can be cyclical. But the predicted earnings growth over the next few years should cover the dividends, which are also expected to rise. The cover might be a bit thin though.

Strong outlook

With 2024 results released in March, CEO Andrea Rossi spoke of “two new targets for 2025-2027: to grow adjusted operating profit before tax on average by 5% or more per annum, and to generate £2.7 billion of operating capital.“

The boss added: “I am delighted to announce that today we are moving to a progressive dividend policy, starting with a 2% increase for the 2024 total dividend per share.” That all sounds ambitiously positive.

But the risk hasn’t gone away. The world seem to be lurching from one trade-related economic crunch to another on an almost daily basis. And if M&G’s dividends can’t keep up with inflation, the shares could take another knock. But I see a decent chance of a bull run here and feel it’s worth a closer look.

The post 2 cheap FTSE 100 shares to consider buying in June appeared first on The Motley Fool UK.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods Plc and M&g Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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