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I believe the FTSE100There are plenty of bargains out there at the moment. I’ve picked out the three that I think currently offer the best value for money.
Out of fashion
Shares in JD Sports (LSE:JD.) are currently (August 16) changing hands for 28% less than the stock’s 52-week high.
It has come under fire after a downgrade in NikeRevenue forecast. The American sportswear giant is expected to account for 50% of JD Sports’ revenue, so this is not surprising.
But the retailer carries several brands, including some that capitalize on Nike’s problems, and the company has an impressive track record of increasing its profits.
With a price-to-earnings ratio (P/E) of around 10—half its average over the past decade—I recently decided to buy some stocks.
Ringing in the changes
In view of stagnating sales and falling earnings VodafoneShares in (LSE:VOD) seem stuck in the 65-80p range. I suspect this is because the company is restructuring its operations and selling its underperforming businesses in Spain and Italy.
There is no guarantee that the recovery plan will work – others have failed. And I am concerned about the company’s debt.
But I have confidence in the CEO. And the company’s most recent trading update – for the first quarter of fiscal 2025 in March – pointed to a recovery. I think now could be a good time to get in.
To assess the potential of the stock, I looked at Deutsche TelekomEurope’s largest telecommunications company. If the same earnings multiple (13.7) were applied to Vodafone, the share price would be 46% higher.
Ready for takeoff
International consolidated airline group (LSE:IAG) shares are currently trading 9% below their 52-week high. Analysts expect earnings per share of 40.97 euro cents (35.18 pence) for 2024. If true, this equates to a price-earnings ratio of 4.8.
This looks cheap compared to easyJet — the only other airline in the FTSE 100 — with an earnings multiple of 6.9. If IAG were given the same valuation, the stock would be 43% higher (243 pence).
The pandemic has reminded us of the risks inherent in the aviation industry. In addition, IAG’s profits have been affected by inflation. Fuel costs are largely outside the company’s control. And a tight labour market is putting pressure on salaries. In August last year, British Airways agreed a 13% pay rise (over 18 months) with its 24,000 employees.
In 2023, these two expenditure items accounted for exactly 50% of operating expenses.
But I think now might be a good time to think about it. Passenger numbers are rising again, net debt is falling, the dividend has been reinstated (albeit on a modest scale) and many expect oil prices to fall over the next 12 months.
The brokers seem to agree with my assessment. Of the 16 analysts who cover the stock, 11 give it a buy rating and five give it a neutral rating.
Bank of America And RBC Capital Markets both have a price target of 230 pence. Of course, there is no guarantee that the share price will reach that level, but it does show that some people have a high opinion of the stock.
League table
I already own two of these stocks and if I had some money to spare I would add IAG to my portfolio. However, in ascending order I would put Vodafone in third place (cheapest), followed by IAG (cheaper) and JD Sports (cheapest).
