Identifying value shares can be time consuming. And with over 1,500 companies listed on the UK stock exchange, it’s easy to become overwhelmed.
To try and narrow down the search, I asked ChatGPT to identify the country’s cheapest share. This is what the software told me.
Caution!
Before giving the answer, the programme warned that it was unable to identify the most undervalued stock “with absolute certainty”. It pointed out that there were a number of different valuation techniques available.
ChatGPT then listed a few shares that appear to be trading below their “estimated intrinsic value”. Warren Buffett describes this as the “discounted value of the cash that can be taken out of a business during its remaining life”. He says it’s the “only logical approach” to evaluating investments.
The alternative Magnificent Seven?
The seven identified by the software were On the Beach Group, Victrex (LSE:VCT), Brickability Group, PageGroup, Motorpoint Group, Pinewood Technologies Group, and Nichols.
I then asked it to pick its favourite. It said it would “lean towards” Victrex. Why?
Well, it suggested the producer of polymers had a “structural niche advantage” and that its recent share price fall could be a buying opportunity. It also highlighted its “strong” balance sheet and good dividend history.
Of course, relying on a piece of software to make investment decisions isn’t a good idea. Artificial intelligence tools have earned a reputation for making some glaring errors. In my view, it’s essential to undertake some human-led research before parting with any cash.
So that’s what I did. I decided to take a closer look at Victrex.
What did I learn?
The group manufactures high-performance polymers (very strong plastics), which are used in a wide variety of applications. Due to the specialist nature of its activities, it has relatively few competitors.
But its share price has come under pressure over the past five years. It’s fallen 70% since March 2021.
The principal reason is that market conditions have resulted in the group selling more of its lower margin products. For example, in volume terms, the company sold 12% more during the year ended 30 September 2025 (FY25) but its revenue was only 1% higher compared to FY24.
Its FY21 gross profit margin was 54%. During FY25, it fell to 45.3%.
Other problems include tariffs and teething problems associated with starting production at its new factory in China.
Over the past five years, the group’s dividend has been remarkably consistent. In fact, it’s remained unchanged at 59.56p a share. It means the stock’s now yielding an amazing 9.3%. However, a flat payout and huge yield could be a warning sign of an impending cut.
Encouragingly, the group has little debt.
So is the stock cheap?
Applying some of the valuation techniques that ChatGPT identified, including the price-to-earnings (P/E) ratio, does suggest the stock’s reasonably priced, certainly by recent standards.
| Financial year | Share price (pence) | Dividend (pence) | Yield (%) | Underlying EPS (pence) | P/E ratio | Cash flow from operating activities (£m) |
|---|---|---|---|---|---|---|
| 30.9.21 | 2,327 | 59.56 | 2.6 | 83.4 | 27.9 | 127 |
| 30.9.22 | 1,670 | 59.56 | 3.6 | 95.0 | 17.6 | 80 |
| 30.9.23 | 1,405 | 59.56 | 4.2 | 77.7 | 18.1 | 42 |
| 30.9.24 | 972 | 59.56 | 6.1 | 51.7 | 18.8 | 84 |
| 30.9.25 | 720 | 59.56 | 8.3 | 43.9 | 16.4 | 71 |
However, I’m unconvinced Victrex is undervalued. Its financial performance is going in the wrong direction, which explains why its share price is declining. Also, the group said 2026 will be a “transitional year”, which is really a polite way of warning shareholders not to get too excited. Therefore, I don’t want to invest.
