As investors, we all have a shared desire to try and avoid overvalued companies and ideally buy cheap FTSE shares. In theory, over time, undervalued stocks should appreciate back to fair value, yielding a profit for those who bought cheaply. Using a popular metric, here are two of the current cheapest options.
A fallen angel
I’m referring to the price-to-earnings (P/E) ratio. This is a common gauge used to assign a value to a company, based on the current share price relative to the latest earnings per share. A lower value typically indicates the firm is undervalued, though the decision to buy shouldn’t be based solely on this number. I use a figure of 10 as a benchmark for comparison.
The first company is WPP (LSE:WPP). This is a controversial choice, given that the share price has fallen by 60% in the last year. A major driver of this has been multiple cuts to its sales and profit outlooks throughout 2025. This has been blamed on clients tightening marketing budgets and reducing discretionary ad spend. This remains a risk going forward.
However, I feel the stock has fallen to a point where it does now look very cheap, with a P/E ratio of 6.50. There are several reasons why we could see a bounce back in 2026.
It’s investing heavily in AI-driven tools and data platforms. This could pay off big time if clients begin to shift back to agencies that can offer advanced insights. Further, a large turnaround plan is just starting to kick in, after new CEO Cindy Rose took the helm in September. Over the next six months or so, signs of progress should become more apparent.
Turning on the engines
Another stock is easyJet (LSE:EZJ). The share price is down 11% over the last year, with a P/E ratio of 7.67.
Despite a very strong annual set of results released in November, there were some contributing factors to the underperformance this year. For example, the revenue per available seat kilometre (RASK) fell 3% versus last year. I read a note from analysts at JP Morgan at the start of the month flagging that the business is facing pricing pressure on fares in a highly competitive short-haul market.
Even though those are risks that need to be closely watched, I think the market is too pessimistic about easyJet. The headline EBIT for the 2025 fiscal year was £703m, up 18% from 2024. It’s also becoming more diversified in the revenue split from different areas. For example, the bump in profit was pretty evenly split between the airline operations and the holidays division. This should bode well going forward.
I also think some investors are still concerned about what happened during the pandemic. It was indeed a tough time for the company. But this was a black swan event. EasyJet has rebounded very strongly and is arguably in a better position now than it was before the pandemic hit. Therefore, as people become more comfortable with the idea that another pandemic probably isn’t around the corner, the easyJet share price should move higher again.
I believe both stocks are good value right now and could be considered by investors.
