Looking for value stocks? This FTSE banking gem looks like a no-brainer buy to me!

On the lookout for value stocks, our writer explains why this FTSE 100 banking giant is hard to ignore, and breaks down her investment case.

| 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.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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 AstraZeneca right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if AstraZeneca made the list?

See the 6 stocks

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.

Created with Highcharts 11.4.3Standard Chartered Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

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.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Standard Chartered 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.

More on Investing Articles

Investing Articles

Want a comfortable retirement? Here’s how much you need in your SIPP

The SIPP is a great vehicle for confident investors to build their personal pension over time and eventually use that…

Read more »

Investing For Beginners

3 ways I try to spot cheap shares during a stock market crash

Jon Smith talks through his process of filtering for cheap shares at a time when simply buying anything isn't the…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

As share trading hits new records, here’s why I’m planning to keep buying UK shares!

Thinking like Warren Buffett and buying 'on the dip' can unlock significant long-term returns from UK shares. Here's why.

Read more »

Elevated view over city of London skyline
Investing Articles

UK stocks: a brilliant buying opportunity?

UK stocks have taken a battering in recent days. That can be disconcerting -- but our writer is taking a…

Read more »

Bronze bull and bear figurines
Dividend Shares

2 dividend shares that could provide some shelter from the market storm

Jon Smith points out a couple of dividend shares that have yields in excess of 5% -- and that have…

Read more »

Investing Articles

I’ve been snapping up shares in this 11.6% yielding FTSE 250 growth stock

As a trade war knocks a quarter of the value off this FTSE 250 asset manager in a few days,…

Read more »

Investing Articles

I asked ChatGPT which FTSE 100 stocks are screaming buys for Trump’s tariff war. Here’s what it said

As the trade war heats up and the sell-off in stocks resumes, Paul Summers is looking for great FTSE 100…

Read more »

Investing For Beginners

Analysts now expect up to 4 UK rate cuts this year! Here’s what it could mean for the FTSE 100 index

Jon Smith points to the rapidly shifting market expectations when it comes to UK interest rates and explains the impact…

Read more »