9 UK value stocks to watch
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.
1. Ferrexpo (FXPO)
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.
