3 FTSE 100 stocks I don’t think will stay cheap for long

The FTSE 100’s lack of growth in recent years has led to some stocks looking curiously undervalued. Here are my three best bargains right now.

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A 2% fall in the last month means the FTSE 100 has traded sideways for the last five years. But this lack of growth could be an opportunity to snap up a few bargains. 

The price-to-earnings ratio of the Footsie is still only 14. That’s a lot cheaper than its 10-year average of 19 or the US S&P 500‘s P/E ratio of 24. 

And among all the companies on the index, here are my top three most undervalued right now. 

As cheap as the 90s

My first pick is the £60bn pharma giant GSK (LSE:GSK). It’s easy to see the value here when I could snap up a share today for £14.75, the same price the stock was in the late 1990s.

I’m shocked to see a P/E ratio of only 10 at that price. Especially compared to its competitor AstraZenaca’s P/E ratio of 49.

I suspect that GSK spinning off its consumer healthcare segment into Haleon last July didn’t help matters. The stock is down 18% since then.

But earnings-per-share of £0.72 in 2014 leapt to £1.22 in 2022. That 69% increase tells me underlying performance has been strong. 

The future looks promising too. With 60 new drugs in the research and development phase, I think I’ll open a position here soon.

Over 8% dividend

Second up is Legal & General (LSE: LGEN), a firm that sells a wide range of financial services like pensions and has been in operation since 1836. 

Shares go for £2.30 currently. That makes a 6.42 P/E ratio which seems extremely cheap.

One reason the P/E ratio is low is that the firm operates in a mature market, so there’s less room for growth. 

But a dividend yield of 8.39% — the fifth-highest of any FTSE 100 company — makes me think that it’s undervalued at that share price.

The dividend was paid from just 48% of earnings last year, so it seems to me that the high payouts are sustainable, too.

For these reasons, I already own a position in Legal & General and may pick up more shares at this cheap share price.

Shares for 89% off?

My third choice is Anglo-Russian miner Polymetal (LSE:POLY). The firm’s mines in Russia and Kazakhstan make it a top-10 producer of gold and top-five producer of silver worldwide.  

A share here used to cost £20.28 in 2020. But the company’s association with Russia threw up sanctions and other problems, particularly since the invasion of Ukraine.

The firm posted a loss in 2022 for the first time in eight years, and the share price dropped a staggering 89% all the way down to only £2.45.

But the core business continued smoothly. Revenues last year remained at around £3bn. And with management expecting a return to profit this year, the price looks far too cheap if you ask me.

Sadly, Polymetal just announced it will move to the Astani International Exchange from the London Stock Exchange. The move will allow the company to sidestep some of those sanctions. 

But, it will also cause me all sorts of headaches if I wanted to buy and sell shares. As such, I’ll be leaving this stock alone.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Fieldsend has positions in Legal & General Group Plc. The Motley Fool UK has recommended GSK and Haleon Plc. 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.

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