Some of the UK’s most popular listed companies — including Tesco, Lloyds, Rolls-Royce, and BT — have surged this year. After strong runs, many are now close to fair value, leaving limited potential for share price growth in the near term. While they may remain solid long-term holdings, stronger opportunities may lie elsewhere on the FTSE.
Three companies in particular — London Stock Exchange Group (LSE:LSEG), Jet2 (LSE:JET2), and Melrose Industries (LSE:MRO) — offer stronger prospects based on their valuation and growth potential, albeit with their own risks.
The FTSE 100’s most undervalued stock
According to the consensus of analysts, the London Stock Exchange Group is currently the most undervalued company on the FTSE 100. The 17 analysts covering the stock, who aren’t always to be trusted, suggest it’s trading at an 42% discount to fair value.
The company recently reported a 49.5% adjusted EBITDA margin, meaning nearly half of each pound of revenue is retained as earnings before depreciation and amortisation.
Earnings per share are forecast to rise from 399p in 2025 to 442p in 2026. This results in a price-to-earnings (P/E) ratio that moderates from around 20.5 to 19.3 times.
Despite these positives, risks exist. The firm is retiring legacy products such as Eikon, and its Annual Subscription Value growth remains modest. Moreover, competition from Bloomberg and FactSet could limit pricing power.
Yet with strong margins, high barriers to entry, and a valuable partnership with Microsoft, it’s definitely a stock worth considering.
Massive discount on the AIM
Jet2 shares have fallen sharply after the airline warned profits would come in at the lower end of forecasts. The AIM-listed company cited customers booking closer to departure — a trend that complicates revenue planning.
Even so, the valuation is, once again, really compelling. Jet2’s enterprise value-to-EBITDA ratio of 0.82 compares favourably with peers such as TUI (1.5) and IAG (3.6). That’s largely because the company’s net cash position is so vast.
Earnings are projected to grow steadily from 204p in 2025 to 231p in 2027. Over time, that will be supported by an expanding, more fuel-efficient Airbus A321neo fleet.
However, there are real risks as with any investment. Rising labour costs (expected to increase by £25m annually), oil price volatility, and fragile consumer confidence could all pressure margins.
Still, Jet2’s industry-topping balance sheet and disciplined capacity management provide a cushion. I believe it’s absolutely worth considering.
The next Rolls-Royce?
Melrose, an aerospace and defence company, reported a strong first-half adjusted operating profit of £310m. That’s up 29% year on year and well ahead of expectations. This can contributed to a surging share price over the past six months.
However, I still believe the stock is undervalued. The company expect more than 20% annual earnings growth through 2029, and the current adjusted P/E of 18 times looks undemanding compared to Rolls at 43 times.
Melrose is exciting because it boasts 70% sole-source positions on key aerospace platforms, lending pricing power and visibility rarely found in UK manufacturing.
However, risks include supply chain challenges, tariff exposure, and currency fluctuations. All these can affect margins.
Nonetheless, I’m confident Melrose is underappreciated. It continues to be a favourite of mine and well worth considering.
