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When I'm looking for cheap stocks to buy on Footise, there's one simple measure I usually start with.
I look at all forecast price-earnings (P/E) ratios, for the current and next fiscal year. I leave any that don't have a positive P/E, I consider too low.
The following table shows the five cheapest FTSE 100 shares that way, everything that attracts my attention. It shows the P/E forecast for the current year, and next year. And I've thrown in dividend yields as well.
| Stock | The latest share price |
IP/E cur | Next IP/E | Div cur | Div next |
| International Included Airlines |
190p | 4.9 | 4.5 | 2.7% | 3.4% |
| Centrica | 117 p | 6.1 | 8.2 | 3.6% | 4.3% |
| Beazley | 755p | 6.6 | 6.6 | 1.9% | 2.1% |
| NatWest Group (LSE: NWG) |
336p | 7.2 | 7.0 | 5.4% | 5.7% |
| BP (LSE: BP.) | 413 p | 9.5 | 6.8 | 5.7% | 6.2% |
Super cheap
Airlines have been sidelined right now by the Middle East conflict and the impact it has had on oil prices.
But higher oil prices shouldn't hurt BP, and that's one of the two main attractions for me. Its forward IP/E of 9.5 is not very low. But earnings forecasts will drop to 6.8% next year on the list.
Despite Brent Crude trading at $78 a barrel at the time of writing, BP's share price is still down 12% year to date in 2024. And it's still lower than it was before the pandemic.
In its last quarterly update in July, CFO Kate Thomson said:
Our decision to increase our dividend by 10%, and to extend our commitment to the buyback program to 4Q 2024, reflects the confidence we have in our performance and our vision for revenue generation.
What is largely unknown is how long BP will be able to pump oil and make a profit from it. And, surely, we will wean ourselves off of fossil fuels one day.
But a cash cow stock like BP, paying huge dividends while at such low P/E ratios? It all makes me seriously consider buying.
Best value bank?
That low valuation of NatWest Group makes me wonder if it might be the best FTSE 100 bank to add to my Stocks and Shares ISA in 2024.
Those low forecast P/E multiples are probably half of Footsie's long-term average. And they come even after the price had a 2024 breakout, up 53% year to date.
My biggest fear is what impact falling interest rates will have on Barclays lending. And it sounds like we may have some big cuts soon.
As well as dividends, NatWest had a £1.2bn share buyback, which it completed in May. And the recovery of £2.5bn of distressed loans Metro Bank looks like a canny move.
For the full year, the bank told us in the interim that it expects a return on equity of more than 14%, which I consider very attractive. But the board pointed out that the year will depend on our uncertain economic outlook.
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