FTSE 100: 1 cheap UK share to buy now

This FTSE 100 stock has seen an impressive share price increase in the past year, but its relative price is still low.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Scene depicting the City of London, home of the FTSE 100

Image source: Getty Images.

Segro (LSE: SGRO) has seen a 30% increase in share price in the past year. Over the past three years, it has almost doubled. The share price is now at around £12, which is not the most expensive but certainly not among the cheapest FTSE 100 stocks either. 

But I still think the warehouse developer is a cheap UK share to buy for my portfolio. And that is because despite the increase in share price, its price relative to its financial performance is moderate. A look at this relative price is important for me as an investor, because it helps me benchmark it against other FTSE 100 shares. 

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Low relative price for the FTSE 100 stock

If its relative price, measured most commonly by the price-to-earnings (P/E) ratio, is lower than the average for FTSE 100 shares, I am tempted to take a closer look at it. This can happen for a number of reasons. For instance, the outlook for the company maybe weak, so investors do not buy the stock. Or maybe, it has more potential than is perceived at present. 

I think Segro is one such stock with somewhat unrecognised potential. The real estate investment trust (REIT), which develops and manages warehousing properties, has a P/E of 9.8 times only. Compared to it, a stock like Lloyds Bank, which has underperformed in recent years, has a P/E of 39 times.  

Strong long-term prospects

And its prospects look good too. The company is an important part of the e-commerce supply chain. And I think online sales are only going to grow over time, by the looks of it. Even though the pivot towards them was sharp during the pandemic, they are still strong after lockdown easing. 

I think this can hold the likes of Segro in good stead over time. This will be particularly true in the near future, as the economy is expected to boom. Its first-quarter trading update is encouraging too. It grew its total rental value in the first quarter of the year and is also expanding its portfolio of properties. 

In his comment on the update CEO David Sleath pointed to a positive outlook for the company “as well as our ability to drive further sustainable growth in rental income, earnings and dividends over the coming years.” 

A cheap UK share to buy

There is of course the possibility that the future may not look as good as the past does. Online sales could slow down, the economy may not pick up as expected and the party may be over for e-commerce a few months from now. It is unlikely that there will be a dramatic pullback, but I think we can realistically expect some softening. 

I still think, though, that just in P/E terms and given its performance last year, there is potential for its share price to rise further. In fact, for me it is a cheap UK share to buy for the long term.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

This cheap share fell 30% last week. I’d buy now

This huge US corporation saw its shares crash by 30% last week. But I'd buy this surprisingly cheap share now…

Read more »

Various denominations of notes in a pile
Investing Articles

These 7 shares produce passive income of 7% to 11% a year!

Passive income is extra money I make without working. By buying these seven shares, I could earn 8.9% a year…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

6.6%+ dividend yields! 2 FTSE 100 dividend stocks to buy

Finding the best dividend stocks to buy requires extra care today as soaring inflation takes a bite out of shareholder…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

At 85p, are Rolls-Royce shares a slam-dunk buy?

The Rolls-Royce share price is in penny stock territory. Roland Head explains why he thinks this FTSE 100 stalwart looks…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

‘Big Short’ investor Michael Burry is buying this quality growth stock! Should I?

In the first quarter, Michael Burry bought more of this growth stock. Is this a hint that I should also…

Read more »

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

Stock market crash: here’s why falling prices is good news

Over in the US, a stock market crash is battering high-priced stocks. But I see falling shares as an opportunity…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

These 5 FTSE 100 shares crashed in 2022. I’d buy 1 today

Although the FTSE 100 index is flat in 2022, some Footsie shares have crashed hard this year. But I see…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How investors can boost their passive income when the FTSE is falling

Stock markets are plagued with fears right now. Here's why I firmly believe those fears improve our passive income prospects.

Read more »