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View nine of the UK's 'cheapest' value stocks listed on the London Stock Exchange (LSE), based on several value investing metrics, as of December 2021. All the stocks on this list have been growing revenue and net income over the past five years, and some also offer dividends.
The top UK value stocks have been sourced from companies listed on the LSE that meet certain metrics for value investing. These valuation metrics are:
A price to earnings ratio (P/E) between 1 and 15. Companies with low P/E ratios are typically seen as “value” stocks with potentially reasonable valuations.
A market cap of at least £100m and a share price of at least 100 pence. This is to avoid more speculative penny stocks.
A price-to-book ratio (P/B) of less than 5. This means the market cap of the company (shares outstanding x share price) is less than 5x the book value or value of the net assets of the firm (the company’s assets minus its liabilities).
The average volume is at least 200,000 shares per traded day.
A minimum of 5-year earnings per share (EPS) and 5-year sales growth above 5%. These metrics make sure the company has been growing, not shrinking. Investing strategies focused on growth often use criteria like this one.
The following list of potentially undervalued UK stocks doesn’t include any mutual funds or ETFs and only lists stocks priced in GBP. The data was sourced from Investing.com* at the start of December 2021 and is correct at the time of publication.
Ferrexpo mines, processes, and sells iron ore pellets. It has the lowest P/E ratio on the list, making it an efficient value UK stock. However, when considering how to pick stocks, remember that P/E is only one metric among many that may determine whether a stock price rises or falls over time. Here is how the company ranks based on valuation metrics:
P/E: 2.22
P/B: 1.22
Market cap: £1.72bn
Average daily volume: 1.21 million shares
Beta: 1.24
Dividend yield: 13.2%
The company has also seen a steady rise in revenue and net income (EPS is net income divided by shares outstanding) since 2015, growing net income from £33m to £635.3m in 2020.
Oakley Capital is a venture capital firm. It is the cheapest stock on the list in terms of the P/B ratio. But as discussed above, P/B is just one metric when considering how to invest in stocks.
P/E: 4.46
P/B: 0.85
Market cap: £670m
Average daily volume: 216,000 shares
Beta: 0.81
Dividend yield: 1.2%
Overall, the company has been able to grow revenue and net income aggressively over the last several years. Net income rose from £21.57m in 2015 to £92.39m in 2020.
Royal Mail Group is a multinational postal service and courier company that also operates Royal Mail and General Logistics Systems.
P/E: 5.82
P/B: 1.00
Market cap: £5bn
Average daily volume: 3.6 million shares
Beta: 1.69
Dividend yield: 3.33%
The company has seen increasing revenues since 2016, although net income has been relatively flat until 2021. In 2016, net income was £241m, fluctuating up and down until gaining some traction in 2021, when it jumped to £620m.
Ashmore is an investment management company. The British firm manages funds for both retail and institutional clients, with a focus on emerging markets.
P/E: 8.73
P/B: 2.17
Market cap: £1.95bn
Average daily volume: 1.47 million shares
Beta: 1.41
Dividend yield: 5.6%
Revenue and net income have increased over the last several years. Between 2016 and 2021, net income rose from £127.8m to £240.1m.
Anglo Asian Mining mines for copper, silver, gold, and other precious metals in Azerbaijan, Asia.
P/E is 9.02
P/B: 1.31
Market cap: £124m
Average daily volume: 215,000 shares
Beta: 0.98
Dividend yield: 5.4%
The company has seen a strong rise in net income, accompanied by a steady rise in revenue. In 2015, the company lost £7.38m, turned a profit in 2016, and has been on the rise since, profiting by £23.22m in 2020.
Sirius Real Estate develops and operates commercial properties in Germany, including office space, storage facilities, and business parks.
P/E is 10.84
P/B: 1.73
Market cap: £1.6bn
Average daily volume: 2.5 million shares
Beta: 1.08
Dividend yield: 2.5%
The company has shown earnings and revenue growth over the last several years. 2021 net income was £147.45m, up from £54.67m in 2016.
Caretech provides support services in the UK, including foster care as well as children and adult services.
P/E: 12.98
P/B: 1.73
Market cap: £653m
Average daily volume: 110,000 shares
Beta: 0.52
Dividend yield: 2.3%
The company has seen strong revenue growth in recent years, especially in 2019 and 2020. However, this has only converted into minor net income growth. In 2016, net income was £22.87m, and in 2020, it was marginally higher at £25.12m.
Phoenix Spree is a real estate investment firm focusing primarily on residential and commercial apartment buildings in Germany.
P/E: 13.38
P/B: 1.02
Market cap: £367m
Average daily volume: 144,000 shares
Beta: 0.47
Dividend yield: 1.6%
Net income for this company has fluctuated significantly from year to year, yet the overall trajectory has been up. Net income in 2015 was £9.72m and increased to £29.79m in 2020.
Belvoir is an estate and lettings agent that provides franchisees and financial services for businesses. Based in the UK, it is the smallest company on this list in terms of market cap.
P/E: 13.98
P/B: 2.89
Market cap: £95m
Average daily volume: 107,000 shares
Beta: 1.30
Dividend yield: 3.8%
Net income and revenue have risen in a staircase pattern, with increases each year since 2016. Net income was £1.83m in 2016 and £5.32m in 2020.
Please remember that past performance is not a reliable indicator of future results.
FAQs
P/E and P/B are common metrics used by value investors. Beta is another one that tells investors whether an asset is correlated to the major stock indexes. Value investors also consider whether the company is growing or shrinking. A growing company at a good value is a better deal than a shrinking company. A shrinking company can have an attractive P/E all the way to zero. Learn how to invest in stocks.
You could run a stock screener through UK stocks that are trading below a P/E ratio of 15. Add in additional parameters and set minimum thresholds for factors such as market cap, price, and volume. There is no magic number with these. They just help eliminate penny stocks (or focus on them if market cap and prices are kept low). Optionally, add in parameters such as 5-year EPS and revenue growth to see which companies are growing and shrinking.
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