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These 3 FTSE 100 ‘value’ stocks have 50% upside, according to city broker

Value investing has been out of favour for a while now. However, there have been signs recently that it could be making a comeback. As a result, Mirabaud Securities recently put together a list of European value stocks it believes have 50% upside on a three-year view. Here’s a look at three FTSE 100 stocks that made the list.

WPP

Advertising giant WPP (LSE: WPP) was one FTSE 100 stock that made it, and this isn’t surprising in my view, as the shares have fallen significantly over the last few years and currently trade on a low P/E ratio of just 9.7. Even if the stock rose 50% from here, it would still only trade on a P/E ratio of 14.5, which isn’t high for a company with WPP’s track record.

After a difficult few years in which the advertising industry has been disrupted by technology companies, and influential CEO Martin Sorrell has left the company, WPP appears to be turning things around slowly. For example, just last week, the group announced in an AGM statement that new business performance has been “solid”, with notable client wins including Adidas, Duracell, GSK, and L’Oréal. The company also advised its sale of Kantar is progressing in line with its expectations.

With WPP shares currently yielding 6.2%, I see a lot of value on offer right now and I think there’s definitely potential for upside. 

Aviva

Another out-of-favour FTSE 100 value stock that made Mirabaud’s list was insurance group Aviva (LSE: AV). Like WPP, it also currently trades at a low valuation – its forward-looking P/E ratio is a rock-bottom 6.7.

As my colleague Rupert Hargreaves recently pointed out, Aviva has lacked direction recently. For a while there, it didn’t even have a CEO, so it’s no surprise the shares have languished. However, in March, the group appointed Maurice Tulloch as chief executive, and he’s already announced plans to cut costs and split up the company’s life and general insurance businesses to enhance the group’s focus. So it looks like Aviva is heading in the right direction.

With a high prospective dividend yield of 7.8% on offer right now, I think Aviva shares have the potential to rise in the years ahead.

Schroders

Finally, investment management Schroders (LSE: SDR) also made the list. Now, I’m a big fan as the company has an excellent reputation within the investment management industry and it also has a fantastic dividend growth track record.

I own the non-voting shares myself. However, to be honest, I would be surprised if the stock was able to climb 50% in the next three years, given we are already 10 years into the current bull market. It’s not impossible, of course, given that the shares currently trade on a P/E ratio of nearly 15, a 50% gain from here in the space of 36 months is asking a lot of the shares.

That’s not to say the stock isn’t a good buy right now. A P/E of 15 for Schroders is quite reasonable, in my opinion, and with a yield of 3.8% on offer (4.7% if you buy the non-voting shares), I think the stock is capable of providing solid total returns for investors in the years ahead.

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Edward Sheldon owns shares in WPP, Aviva and Schroders (non-voting). The Motley Fool UK has recommended Schroders (Non-Voting). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.