5 of the top bargain-basement UK shares to consider buying right now

Many UK companies are fairly priced, but these five shares are plain cheap, despite being backed by good businesses with prospects.

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Some UK shares just look too cheap. So here are five that look well worth deeper research and consideration right now.

A turnaround may be coming

In the lead FTSE 100 index, telecommunications giant BT (LSE: BT.A) is changing hands on a low rating. With the share price near 146p, the forward-looking price-to-earnings (P/E) ratio is just below 7.9 for the trading year to March 2026. That compares to the average rating for the FTSE 100 at about 13.6.

However, BT does have risks, one of which is the mountain of debt on the balance sheet. Another is its patchy earnings record, suggesting an uncertain path ahead. On top of those things, BT operates in competitive markets.

Should you invest £1,000 in BT right now?

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Nevertheless, the company announced this year it had passed peak capital expenditure for its fibre broadband rollout programme. So perhaps more of the firm’s cash flow can be used for debt-reduction and shareholder dividends.

Meanwhile, the anticipated dividend yield for next year is running at about 5.5%, which offers shareholders a decent level of income now. But if the company’s cash flow can drive dividend progression in the coming years, the rising payment may help push the share price higher too.

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BT may be on the cusp of an enduring turnaround. However, City analysts predict flat earnings next year after a decline this year. So there’s much for the firm to do. But that’s probably why the valuation looks undemanding.

The attractive financial sector

Meanwhile, some of the big financial companies are on low ratings, such as Legal & General and Aviva. As I write (17 October), both have forward P/E ratings below 10 and anticipated dividend yields well above 7%.

In each case, City analysts anticipate robust earnings increases this year and next with positive dividend progression too.

However, the financial sector is cyclical and that can lead to some wide swings for earnings and share prices. So it would be easy to mis-time an investment in the shares and end up losing money.

Capital gains from rising long-term share prices may prove elusive. Nevertheless, both have impressive valuation and trading figures now.

In the wider financial sector, TP ICAP looks like good value and could provide useful diversification in a portfolio of stocks. The firm is a UK-based liquidity and data solutions company. But, once again, the business is exposed to cyclical risks and may never attract a higher valuation than it has.

An adventurous oiler

Another to consider is oil and gas company Serica Energy. City analysts’ earnings estimates are robust, and all four brokers following the firm have the stock as either a Buy or a Strong Buy.

That’s no reason in itself to buy the shares, but it makes the company worth further investigation. Meanwhile, the forward-looking P/E is just below three.

Of course, the oil sector is another that’s cyclical, adding risk. On top of that, smaller oil companies like this can see big swings in their fortunes.

Nevertheless, the trading numbers look good and that rating is low!

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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.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Tp Icap 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p 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 8.5%, 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

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