The prices of gold and Bitcoin may have risen significantly in the past year, but investing in undervalued FTSE 100 shares could be a better means of improving your long-term financial prospects.
A number of large-cap shares currently offer wide margins of safety, and could deliver impressive financial performances in the coming years.
With that in mind, here are two FTSE 100 shares that appear to offer good value for money at the present time. They could boost your portfolio’s returns and improve your chances of retiring in comfort.
Education specialist Pearson (LSE: PSON) has made major changes to its strategy over recent years. It has sought to cut costs and shift its focus towards digital opportunities. Although its recent performance has been somewhat disappointing (its most recent trading update showed revenue growth was flat on an underlying basis), it appears to be in a strong position to deliver improving financial performance.
Furthermore, its share price decline over the past year suggests that it could offer good value for money. It trades on a price-to-earnings (P/E) ratio of 12.6. This could undervalue the long-term growth potential of the business, and may mean that it has scope to produce improving capital returns in the coming years.
Although Pearson has experienced mixed operating conditions, with its performance in North America having been disappointing last quarter, its simplified business model could provide a solid foundation for future growth. Therefore, while it may continue to be unpopular among investors in the short run, it could offer long-term recovery potential.
Another FTSE 100 share that could offer long-term turnaround potential is BT (LSE: BT-A). The telecoms company reported a disappointing third-quarter performance last month, with its results being below expectations.
Furthermore, the government’s decision to limit the use of Huawei equipment in 5G and fibre networks is expected to cost the company around £500m over the next five years. This may have contributed to a weakening in investor sentiment towards the stock, with it now trading on a P/E ratio of just 6.6.
However, BT remains on track to meet its previous guidance for the full year. It is also expected to produce a modest rise in net profit in the next financial year, which could be welcomed by investors after what has been a very challenging period for the business.
With the company now having a forward dividend yield of over 7% that is due to be covered 2.2 times by its net profit next year, it could offer a mix of value and income potential for long-term investors. Certainly, its short-term prospects may be highly uncertain due to its challenging financial performance, and it may be unsuitable for those who are very risk-averse or have only a short time left before they might want to sell their shares. But its wide margin of safety suggests that it could offer long-term turnaround potential.
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Pearson. 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.