I think these FTSE 100 shares may be too cheap to ignore this month and are worth a much closer look. Here’s why.
BAE Systems
With defence budgets on the rise, major contractors like BAE Systems (LSE:BA.) are experiencing their best trading conditions for decades.
BAE’s own order backlog rose £8bn over the course of 2024, to £77.8bn. And it’s expecting its hardware continues selling like the proverbial hotcakes — revenues are tipped to rise 7-9% and underlying EBIT by 8-10%, this year alone.
Reflecting its bright outlook, BAE Systems’ shares have risen 31% in value in the last 12 months. And yet a case can still be made that the Footsie company still looks cheap, based on expected earnings.
Okay, its price-to-earnings (P/E) ratio‘s 23.7 times, some distance above the five-year average of 16-17 times. This is based on an expected 10% earnings rise in 2025.
Yet BAE Systems shares still look cheap based on the broader defence sector’s corresponding P/E of 35.2 times.
This doesn’t necessarily make the company a ‘no-brainer’ stock to buy for value investors though. US military budgets could fall as Washington recalibrates its foreign policy and scales back European protection.
Such a development could be a big problem, as BAE makes 44% of group sales from the States. Yet how likely is a sharp fall-off in US arms spending? Some analysts believe President Trump’s plans to modernise the military will prevent such a scenario. It also remains to be seen whether Department of Defense spending will plummet as the number of geopolitical risks increase.
Besides, sales and profits could still take off as spending among other NATO states increases. The defence bloc’s calling for members to raise arms spending to 3% of GDP by 2030, from 2% currently.
Antofagasta
Copper producer Antofagasta (LSE:ANTO) is another cheap FTSE 100 share I feel merits close attention. City analysts expect earnings to rise 36% in 2025 as red metal prices improve. This leaves it trading on a forward P/E ratio of 28 times, and a corresponding price-to-earnings growth (PEG) multiple of 0.8.
Any reading below one implies a share’s undervalued.
Investing in mining stocks can be a wild ride. Commodity prices are notoriously volatile, and a still-uncertain economic outlook poses dangers for industrial metals like copper in 2025. Digging for raw materials is also prone to setbacks that can play havoc with earnings forecasts.
Yet I believe such uncertainties may be baked into the cheapness of Antofagasta’s share price. Besides, solid copper demand from China, allied with signs of thawing trade relations between the US and China, suggests copper prices (up 9% so far this year) could continue to climb.
I’m certainly upbeat about copper miners’ earnings over the long term. A weak mine development pipeline, combined with soaring demand from data centres, electric vehicle manufacturers and multiple other sectors, suggests red metal values could soar from current levels.
Antofagasta is rapidly expanding to capitalise on this too, setting a medium-term production target of 900,000 tonnes.
