These 3 value stocks look dirt-cheap at these prices

Gordon Best has been looking for value stocks, and asks whether these three could now be a buying opportunity for his portfolio.

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Following the volatility that markets have seen in the last few years, the FTSE 100 and FTSE 250 are full of companies with tremendous potential. If investors are able to do the work, then these relatively unknown gems can offer fantastic returns.

I’ve taken a look at three value stocks which I think are at attractive levels, and investigated whether to buy these for my portfolio.

Reckitt Benckiser

Reckitt Benckiser (LSE:RKT) manufactures health, hygiene, and nutrition products worldwide. These products are daily essentials for customers globally. This provides a great deal of pricing power to the company, which is vital during economic uncertainty.

With a strong distribution network, and high demand for its diverse range of products, the company has a strong track record of profitability. Management is experienced, dividends have grown consistently over the last decade, and fundamentals look strong. By considering the future cash flow of the company using a discounted cash flow (DCF) model, the fair value of £76.16 is 15% above the current price of £64.54.

Earnings growth estimates of 5.5% in this area may not be overly impressive, below the market at 9%. However, I place a large amount of value in certainty. With a proven track record, and essential products, this value stock looks promising.

Beazley

Beazley (LSE:BEZ) provides risk insurance and reinsurance solutions. Risk is an ever-present element when considering the future for companies and individuals. This presents a tremendous opportunity, as the market for protection against uncertainty continues to grow. Beazley has a strong financial position, experienced leadership, and diverse range of products, such as cyber, portfolio, and property risk underwriting.

The insurance sector is regulated heavily. This can frustrate investors, but with a good track record of compliance, this value stock appears well positioned. Another potential challenge is competition from larger insurance providers, which may limit growth in the future.

The DCF indicates as much as 71% upside to £19.94 for investors from the current share price of £5.87.

TBC Bank

TBC Bank (LSE:TBCG) provides banking and insurance services to corporate and individual customers in Georgia, Azerbaijan, and Uzbekistan. 

Clearly, there is some exposure to major geopolitical risk. However, these are unlikely to be revoked barring further escalations, with payment services essential for customers. Additionally, fears of financial stability in major global banks have led to uncertainty in the sector generally, but if fundamentals are strong, there may be opportunities.

With 10.4% earnings growth estimates in the next year, the company comfortably outperforms the sector at an expected loss of 1.2%. The historic performance of TBC is also impressive, with 21% growth per year over the last five years. Investors in this value stock received a healthy dividend yield of 7.94%, steadily growing for several years, aside from during the pandemic. The DCF indicates there could be 57% upside to £54.00 from the current share price of £23.50.

Am I buying?

The three value stocks I have outlined are potentially major opportunities if management can continue to execute well amid competition and uncertainty. I have added all three to my watchlist, and will be starting a position at the next opportunity.

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.

Gordon Best has no position in any of the shares mentioned. The Motley Fool UK has recommended Reckitt Benckiser Group 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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