I think 2025 could be the year these low-P/E FTSE 100 shares come good

Some of our FTSE 100 stocks have been on very low P/E valuations for years. If the economy brightens, might this be the year that changes?

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I see quite a few FTSE 100 stocks on low valuations that I reckon stand a good chance of climbing in 2025.

Centrica (LSE: CNA) is the one that immediately strikes me, with its low forward price-to-earnings (P/E) ratio of seven. That’s only about half the FTSE 100 long-term average P/E.

Centrica shares are actually up 46% in the past five years, which might seem surprising. But in this case, it just means we’re looking at a longer-term decline. Way back in summer 2013, the price was around three times where it is today.

Why so cheap?

A share price doesn’t fall like that unless something goes wrong. And plenty has gone wrong for Centrica, the owner of British Gas. That operation has lost a lot of customers in the past decade or so, while gas demand overall has been in decline. Still, just as renewed investor interest in BP and Shell suggests, I think oil and gas could still see many years of demand ahead.

Oh, remember that P/E of seven? At the 2024 interim stage, Centrica had net cash of £3.2bn on its balance sheet. If we strip that out, it suggests an adjusted P/E of under four for the business itself.

Yes, investing in gas today means taking a risk, with energy price uncertainty added to the mix. But of 15 analysts I can find who are making recommendations, 11 have Centrica as a Buy (with the remaing four suggesting we Hold).

I think Centrica has to be worth considering for investors looking for a recovery.

Retail renewal

I can’t think about low-P/E stocks without JD Sports Fashion (LSE: JD.) coming to mind. On 14 January, the company downgraded its full-year profit guidance after seeing revenue dip in November and December. It’s those old “challenging markets” again. The board reckons profits should be “at the lower end of our original guidance range of £955-1035m.”

It suggests a significant drop in earnings per share (EPS) compared to the previous year, and a P/E of close to 11. Against current retail sector difficulties and fearing a sluggish economic recovery, I’d usually consider that about right for a company like this.

But JD is another forecasters’ darling, with strong earnings growth on their cards starting in 2026. If it comes off, we could be looking at the P/E dropping to just seven in the 2025-26 year. Even with the retail stock risk, JD is another consideration for me for 2025.

Another cheapie?

The International Consolidated Airlines share price has climbed 125% in the past 12 months. But we’re still looking at a five-year fall of 48%. And there’s a forecast P/E of only 6.5 for 2025. Is it going to soar like Rolls-Royce Holdings in 2025?

Airlines can be among the most volatile of stocks and not for those who can’t handle the risk. But for those who can, and who understand how to value growth stock opportunities, I think this is another FTSE 100 recovery candidate worth considering in 2025.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce 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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