4 Stocks Trading Far Too Cheaply: HSBC Holdings plc, BT Group plc, GKN plc And Bellway plc

Today I am looking at four brilliant FTSE bargains.

HSBC Holdings

Thanks to its exceptional global presence, I believe banking goliath HSBC (LSE: HSBA) is set fair to deliver resplendent gains in the years ahead. In particular, the business continues to stir up a storm in Asia, and pre-tax profits here surged 14% during January-September to $12.9bn, driven by further growth in Hong Kong. On top of this, a backcloth of falling impairments and stringent cost-cutting should also make HSBC an efficient, long-term earnings generator, in my opinion.

HSBC is anticipated to produce earnings expansion of 15% and 1% in 2015 and 2016 respectively, readings that produce a P/E ratio of just 9.7 times — any reading below 10 times is generally considered a bargain. And estimated dividends of 33.1p and 33.8p per share for this year and 2016 correspondingly produce gargantuan yields of 6.5% and 6.7%.

BT Group

With demand for ‘quad play’ services ratcheting resoundingly higher, I believe BT (LSE: BT-A) will continue to enjoy brilliant sales growth. The acquisition of live Champions League television rights helped the London business add an extra 106,000 television subscribers during July-September, and I believe similar massive investment in its broadband services — not to mention the £12.5bn purchase of mobile operator EE — should keep revenues at its Consumer division rattling higher.

The vast cost of these programmes is expected to push earnings 3% lower in the 12 months to 2016, although a 7% rebound is forecast for 2017. These readings deliver very attractive P/E ratios of 15 times and 14.1 times correspondingly. And I believe BT’s healthy long-term profits picture should keep dividends advancing, too — the business hiked the interim reward 13% in October, and full-year payouts of 14p and 15.5p are predicted for 2016 and 2017 respectively, yielding 3% and 3.3%.


It comes as little surprise that the worsening emissions scandal engulfing Volkswagen is playing havoc with aero and auto parts supplier GKN (LSE: GKN) — the German car giant is responsible for around 15% of sales at the firm’s Driveline division alone. Still, I reckon the firm’s critical supplier status across the entire car industry, not to mention the galloping civil aerospace segment, should propel earnings skywards in the years ahead.

And while the Volkswagen crisis could prompt more share price turbulence, I believe the impact of the scandal on GKN’s top-line is vastly overcooked, making the stock great value at current prices. The company is expected to bounce back from a 10% earnings decline in 2015 with a 4% rebound next year, resulting in P/E ratios of 10.7 times and 10.6 times respectively. And predicted dividends of 8.8p per share for this year and 9.4p for 2017 produce chunky yields of 3.1% and 3.3%.


I am also ultra-bullish concerning the investment prospects of housebuilding play Bellway (LSE: BWAY). Homes prices continue to tick steadily higher thanks to the UK’s rising accommodation crisis, and Nationwide announced last week that average prices advanced 3.9% on an annualised basis during October, to £196,807, and accelerating from 3.2% in the previous month.

Given this favourable backcloth, Bellway is expected to enjoy earnings expansion of 15% for the 12 months to July 2016 alone, producing an ultra-low P/E ratio of 9.9 times. Meanwhile, a predicted payout of 85.9p per share represents a huge upgrade from 77p in 2015, resulting in a handy 3.3% yield.

Fears of a potential ‘housing bubble’ continue to do the rounds, but I believe that transaction values should keep rising as favourable lending conditions — combined with the improving financial clout of homebuyers — mean that demand should continue to comfortably outstrip supply.

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Royston Wild owns shares of GKN. The Motley Fool UK owns shares of GKN. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.