The FTSE All-Share has been packed with exciting UK value stocks for years. And despite the index breaking new all-time highs, guess what? It still is!
The FTSE has a price-to-earnings (P/E) ratio of around 14.5 times, compared to 27 times for the far pricier S&P 500. Many individual stocks look even cheaper than that.
Just because a stock index is rising doesn’t mean individual constituents are. Take Premier Inn and Beefeater owner Whitbread (LSE: WTB). While the FTSE All-Share’s up 15% over the last year, its shares have slumped 20%.
Can Whitbread shares fight back?
Whitbread looks nicely priced with a P/E of 13.5 times earnings. But is it a value trap? Could be.
Whitbread’s set to take a hit from the Budget, as employer’s National Insurance and Minimum Wage hikes drive up costs across the hospitality sector. Employers will struggle to pass the prices on to customers, as they’re struggling too. That may continue with inflation forecast to hit 3.7% later in the summer, according to the Bank of England.
Whitbread does have a big expansion opportunities in Germany where it’s pushing Premier Inn. There’s a problem though. The German economy’s struggling too.
Long term, Whitbread could be tempting. Its five-year expansion plan targets adjusted pre-tax profit of at least £300m and £2bn in shareholder distributions by 2030. The company also aims to increase its hotel room estate to 98,000 as part of a longer-term strategy to reach 125,000.
The shares have a solid trailing yield of 3.5%. The long-term outlook may appear promising, but I’d expect short-term volatility. Especially since Whitbread’s expansion plans may call for significant capital investment, which may hit profitability and cash flow. I think investors will find better value to consider elsewhere.
B&M European Value Retail is cheaper
At least Whitbread’s still in the FTSE 100. Discount retailer B&M European Value Retail (LSE: BME) has tumbled into the FTSE 250 after a bad run. Its shares plunged 37% over the last 12 months.
Investors fled last June when the board skimped on profit guidance in a full-year 2025 trading statement that Shore Capital slammed as a “very backward looking update”.
They didn’t return even when the company reported on 4 November that group revenues for the six months to 28 September had climbed 4% to £2.64bn. The pace of growth had slowed markedly year-on-year.
Are investors being too sceptical? Possibly. B&M brought some post-Christmas cheer with a special dividend worth £151m in a trading update on 9 January. That followed a strong Q3. Nine-month revenues climbed 3.3% to £4.3bn. Yet the B&M share price continues to flounder.
With a P/E of just 8.5 times, value seekers might like to consider this one. Especially as the cost-of-living crisis drags on and consumers continue to hunt for bargains. B&M generates plenty of cash and is on track to open 73 stores this year. Interested investors should brace themselves for short-term volatility.
