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Some UK stocks look very cheap. So here are five that seem worthy of serious research and consideration right now.
Change may be coming
In the front FTSE 100 index, the social media giant BT (LSE: BT.A) changes hands at a low rate. With a share price of around 146p, the forward price-to-earnings (P/E) ratio is just under 7.9 for the trading year to March 2026. That compares to an average FTSE 100 ratio of around 13.6.
However, BT has risks, one of which is a mountain of debt on the balance sheet. Another is its earnings record, which suggests an uncertain path ahead. On top of that, BT operates in a competitive market.
However, the company announced this year that it has passed the highest budget for its fiber broadband rollout plan. So perhaps more of the company's cash can be used to reduce debt and stockholders' equity.
Meanwhile, the expected dividend yield for next year works out to around 5.5%, giving shareholders a decent level of income now. But if the company's cash flow can drive dividend growth in the coming years, the rising payout could help boost the share price again.
BT may be on the verge of permanent change. However, City analysts are predicting lower earnings next year after falling this year. So the company has a lot to do. But maybe that's why moderation seems unnecessary.
An attractive financial sector
Meanwhile, some of the biggest financial companies are at a low level, such as Legal & General again Aviva. As I write (October 17), both have forward P/E ratios of less than 10 and are expected to have a dividend yield of more than 7%.
All in all, City analysts expect a strong increase in earnings this year and next with good profit growth as well.
However, the financial sector is cyclical and that can lead to wide swings in earnings and share prices. So it can be easy to miss the time to invest in stocks and end up losing money.
Big gains from rising long-term share prices may be elusive. However, both have impressive valuation and trading statistics now.
In the broader financial sector, TP ICAP it looks like good value and can provide useful diversification in a stock portfolio. The company is a UK based liquidity and data solutions company. But, again, the business is exposed to cyclical risks and may never attract a higher valuation than it has.
A new oiler
Another thing to look at is the oil and gas company Serica Energy. City analysts' earnings estimates are strong, and all four brokers that follow the company have the stock as a Buy or Strong Buy.
That's not a reason in itself to buy the stock, but it does make the company worth investigating. Meanwhile, the forward P/E is less than a third.
Of course, the oil industry is one that is cyclical, which adds to the risk. On top of that, small oil companies like these can see big changes in their fortunes.
Still, the trading numbers look good and that rate is low!
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