Just look at these tasty FTSE 100 bargains!
With heavy exposure to FTSE 100 shares, my ISAâs taken a bit of a battering recently. But although itâs never pleasant to see my portfolio sink in value, Iâm investing for the long term.
With this mindset, I think the recent pullback in the index of the UKâs most valuable listed companies means thereâs plenty of value to be had. And with their attractive valuations, here are a few stocks that have recently caught my eye.
Finding value
There are lots of ways of identifying cheap shares but probably the most common is the price-to-earnings (P/E) ratio. As its name suggests, this considers a companyâs share price relative to its earnings per share (EPS). In effect, it reveals how much investors are willing to pay for every £1 of profit.
And by looking for stocks with a P/E ratio thatâs currently lower than it has been in recent times, itâs possible to identify potentially undervalued stocks. However, a low ratio may indicate a fundamental problem.
But with the five Iâve recently identified I donât think this is the case. In my opinion, even Diageo — which is experiencing falling revenue and earnings due to changing drinking habits — appears to me to have been over-sold by anxious investors.
| Stock | Current P/E ratio | 5-year average P/E ratio |
|---|---|---|
| International Consolidated Airlines Group | 6.1 | 7.3 |
| JD Sports Fashion (LSE:JD.) | 7.1 | 15.2 |
| Hikma Pharmaceuticals | 7.1 | 11.2 |
| Diageo | 13.8 | 19.1 |
| London Stock Exchange Group | 25.4 | 35.0 |
Yes, all have suffered as a result of the war in the Middle East but, hopefully, this will be over soon.
Of course, Iâd have to do more research before considering whether to invest in each of these five but one that I already own is JD Sports Fashion.
Even better
When I first took a stake, I thought the sports retailerâs shares were cheap. Since then, theyâve fallen significantly in the face of US tariffs and a slowing global economy. And the company’s share price could come under further pressure if artificial intelligence wipes out loads of entry-level roles, those that are typically held by JD Sports’ target demographic of 18-to-24-year-olds.
However, despite these threats, I think the groupâs shares are now in bargain territory. The athleisure marketâs proven to be very resilient in recent years. And Adidas is demonstrating that a 77-year-old brand can be fashionable with the right products and clever marketing. New entrants are also gaining traction.
Analysts are forecasting EPS of 11.37p for JD Sports’ January 2026 financial year (FY26). This implies a P/E ratio of 6.1 compared to a five-year average of 15.2. Based on forecasts for 2028, the multiple drops to just 5.5.
For FY27-FY28, analysts are expecting free cash flow of over £900m.
With the World Cup round the corner, Nike â a key partner of JD Sports — could get a bit of a boost which, in turn, would help lift the British retailer. But the self-styled âKing of Trainersâ sells all brands of footwear and clothing so itâs not totally dependent on a change in fortunes for the American sportswear giant.
Personally, with its strong balance sheet and healthy cash generation, I think JD Sports is a value stock to consider holding for the long term. The group doesnât have any immediate plans to buy more stores so I think it will be able to use its spare cash to refresh its existing footprint. On balance, I think the group â like many others on the FTSE 100 â is attractively priced at the moment.
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More reading
- Forget the FTSE 100 and come back after summer? Here’s my plan!
- Oil surges. Stock markets fall. I’m looking to buy cheap stocks
- The FTSE 100’s full of value shares at the moment. Here are 3 to consider
- After the FTSE 100’s slump, these bargain shares are calling!
- Is the party over for the FTSE 100 â or not?
James Beard has positions in JD Sports Fashion. The Motley Fool UK has recommended Diageo Plc, Hikma Pharmaceuticals Plc, London Stock Exchange Group Plc, and Nike. 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.
