I reckon there are plenty of value stocks to be had across the UK’s premier index.
One pick that caught my eye is Standard Chartered (LSE: STAN).
Here’s why I’d love to buy some cheap shares when I next have some funds free to invest.
Should you invest £1,000 in Standard Chartered right now?
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Banking giant
You may have heard the name Standard Chartered, but you’ll be forgiven for not seeing its presence across the high street here in the UK, like many of its FTSE peers. The reason for this is because the firm focuses on Asian markets and other emerging territories. However, with a market cap close to £20bn, it’s one of the largest banks listed on the FTSE 100.
The shares have experienced mixed fortunes over the past 12 months. They’ve meandered up and down, but ultimately gained 5% in this period, from 719p at this time last year, to current levels of 755p.
The positives
Starting with Standard Chartered’s valuation, on the surface of things, a price-to-earnings ratio of just over eight is attractive. However, this is in line with other UK banking powerhouses. In fact, some are cheaper. However, looking at its price-to-earnings growth (PEG) ratio, a reading of 0.7 indicates the shares are undervalued. A reading below one usually indicates value for money.
Next, Standard’s access to some of the wealthiest economies across the globe, such as Hong Kong, Dubai, and Singapore, is exciting. Wealth is growing in these regions, and Standard’s presence and brand power could help it grow earnings, as well as returns.
Speaking of returns, a dividend yield of just 3% helps my investment case. Although I can see this potentially growing in the future, it’s worth remembering that dividends are never guaranteed.
Finally, Q1 2024 results made for good reading, and provided a snapshot of earnings growth potentially on the cards. Revenue is forecast to grow 14% per year. However, I do understand forecasts don’t always come to fruition.
Risks and final thoughts
Despite my bullish stance, there are credible issues that could dent Standard’s earnings and returns.
On one hand, Standard’s presence and growth opportunities in its current markets are exciting. On the other hand, economic difficulties in Asia present a real risk that could damage the firm and its investor appetite. Recent economic woes in China, and murmurs of recession across many prominent economies, have hurt the shares. Although, it’s worth mentioning this has been the case for most banking stocks. I’ll keep an eye on this.
Furthermore, Standard’s modus operandi of targeting emerging territories come with risks as well. Economic and geopolitical volatility in these markets could hurt earnings and returns too.
Overall, the pros outweigh the cons for me. It’s hard for me to ignore Standard’s existing presence, as well as previous track record of performance, in exciting, wealthy markets, namely Asia. As a long-term investor, I’d look past potential short-term issues ahead, and towards greener pastures of returns and growth.
