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A quick look at the FTSE 100 it shows that there are a lot of cheap stocks right now. That is not surprising given the current tense situation. Time to go shopping?
I FTSE 100 has resisted today’s geopolitical worries well, falling less than 2% last month. It’s up 18.5% in 12 months, with gains on top. Sectors such as defence, energy and mining have proved resilient amid the turmoil in the Middle East. But some individual stocks have really taken a hit.
I tend to consider a company cheap when its price-to-earnings ratio falls below 12 or 13, and it’s really cheap when it drops to single digits. The two trade in fractional values.
Reckitt shares are down
Health, hygiene and home care group Reckitt Benckiser (LSE: RKT), which owns brands such as Dettol, Nurofen, Durex again Gavisconit has a P/E of just 0.6. The last time I checked, there were more than 20. However on 5 March it reported a strong 5% rise in full-year revenue to £14.2bn, helped by strong growth in emerging markets. Adjusted pre-tax profits rose 5.2% to £3.32bn.
The board also increased the full-year dividend by 5% to 212.2p. That follows on the heels of a special dividend of 235p in February.
Despite that, shares are down 17% in the past month and up just 2.5% for the year. They are about 15% less than five years ago.
Trade is weak in Europe, as a mild winter hits demand for cold and flu remedies. Consumer goods stocks were also broadly unpopular as investors feared that the war in Iran would increase inflation. Reckitt has struggled to restore market confidence after years of hard work and investors seem reluctant to give it the benefit of the doubt today.
Personally, I think Reckitt is worth considering from a long-term perspective, especially with a trailing dividend yield of close to 4%. However, I am slowly be careful. Right now, investors just aren’t into that.
Legal & General shares were also flat
Legal and General Group (LSE: LGEN) looks cheap even on paper. Its IP/E sits at around 0.3, which is absurdly low. Earnings per share growth has been jumping across the board lately, as my table shows. The same is true of P/E.
| 2021 | 2022 | 2023 | 2024 | 2025 | |
| Earnings per share growth | 55% | -62% | -43% | 2,322% | 367% |
| The P/E ratio | 8.7 | 19.4 | 34.2 | 1.3 | 0.3 |
Legal & General should be doing better, having announced its biggest ever share buyback on 11 March, worth £1.2bn. Core operating profit for the full year rose almost 6% to £1.62bn, but that was below forecasts.
The number most investors are focused on is yield, which is now up 8.9% on the FTSE 100 next. The board recently increased pay by 2%, which looks to be the benchmark going forward. The catch is that it is only covered about 1.1 times by profit, so it doesn’t completely block bullets.
Legal & General’s share price has fallen nearly 8% amid recent market turmoil. It increased by about 2.5% last year and remains 15% lower than five years ago.
I think it is worth considering for income oriented investors but we may have to wait for some time to see further growth. Both of these stocks look ridiculously cheap to me but they have their issues too.
