These are the lowest P/E value stocks on the whole FTSE 100

On this measure, it looks like the big FTSE banks could be the best value stocks to buy now. But there’s more to it than that.

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It’s not easy trying to decide which are the best value stocks to buy at any time. And it’s even harder when the stock market is so uncertain.

Perhaps the most common measure is a stock’s price-to-earnings (P/E) ratio. And, right now, some of them in the FTSE 100 are so low it almost hurts my eyes to look at them.

It’s only a rough measure, but it gives us some idea of how many years it might take for a company’s earnings to cover the cost of its shares.

Rock bottom P/Es

Ideally, the lower the better, though it’s not that simple. A stock with better growth or dividend prospects might, for example, be worth a higher P/E.

I’ve looked over the FTSE 100, and the following table shows the five with the lowest P/E values. At least, those I could find at the time of writing. Different sources show different values, and things can change quickly.

StockRecent
price
P/E 2023P/E 2024P/E 2025
Barclays150p5.14.84.0
NatWest Group220p5.25.75.1
HSBC Holdings618p6.05.46.1
BP467p6.06.76.9
Lloyds Banking Group47p6.46.96.2
(Sources: Yahoo! Finance, MarketScreener)

Sector danger

It’s not often that a whole sector dominates the bottom of the P/E value table. It might not be much of a surprise though that banks fill four of the bottom five slots today.

Let’s try to get some sense of scale on this.

The average P/E for the FTSE 100 over the long term is somewhere around 15. At the moment, at the end of 2023, it’s down around 11. And that does seem to reflect the uncertainty and weak sentiment over the UK stock market today.

But I think that’s still too low for the index. The past year might have been tough, but forecasts show rising earnings and dividends for the Footsie in 2024 and beyond.

Cheap banks

Oh, and you know which stocks they expect to come out on top of the earnings growth table? That’s right, it’s the financial sector. And it’s not by a whisker, it’s by miles.

Do banks really deserve to be valued at only around half the index P/E? Even when the index itself is on a low?

Well, that’s for individual investors to decide for themselves. I’m just putting the numbers out there to try to show where the low-valued shares actually are.

Sector risk

It might be tempting to buy all five of these and see where they go in the next 12 months.

That would open me to a fair bit of sector risk though. And it’s not like the banking industry hasn’t had its own big crashes in the past.

I owned some bank shares when the big crisis kicked off in 2007. But I was saved from big losses by some good diversification.

Still, I think it will be worth looking again at these stocks in another year, and seeing which are in the bottom five then.

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.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc, HSBC Holdings, and Lloyds Banking 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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