How can these 2 great FTSE 100 shares be so crazily cheap?

These two FTSE 100 shares took a beating in last month’s market meltdown. But even after bouncing back a bit, they still look too cheap to me.

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Now the new ISA season is here, I’m hunting for cheap, unloved and undervalued stocks. Today, I rummaged through the FTSE 100 for value shares.

Two deeply discounted Footsie shares immediately jumped out at me. Fortunately, my wife already owns both shares in our family portfolio.

FTSE 100 share #1: Barclays

As a ‘Big Four’ clearing bank, Barclays (LSE: BARC) is a high-street name. Yet the Blue Eagle business’s shares slumped during last month’s banking crisis.

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On 8 March, this FTSE 100 stock hit a 52-week high of 198.86p. But as three mid-sized US banks collapsed and Credit Suisse was rescued by a rival, Barclays shares nosedived.

Just 12 days later, on 20 March, this share had imploded to a 52-week low of 128.12p. At this time, I repeatedly and forcefully argued that this stock was insanely cheap. On Monday, Barclays shares closed at 154.28p, 20.4% above their 8 March low, valuing this leading lender at £24.6bn.

Even after this rebound, the stock still looks undervalued to me. It trades on a price-to-earnings ratio of just 5.3, for an earnings yield of 18.9%. Also, the above-average dividend yield of 4.6% a year is covered 4.1 times by trailing earnings. That seems a healthy margin of safety to me.

Of course, banks are hardly in fashion after last month’s shenanigans in the USA and Switzerland. Also, they undoubtedly face higher loan losses and bad debts in 2023. And a recession could make things even worse. Yet if I had any spare cash, I’d happily buy more Barclays stock today.

Value stock #2: L&G

Between 1987 and 2002, I worked for several leading UK financial firms. During this time, I grew to admire Legal & General Group (LSE: LGEN).

L&G’s storied pedigree dates back all the way back to 1836. Over almost two centuries, it grew to become a leading provider of UK life assurance, savings and investments. Today, the group manages £1.4trn in assets for over 10m customers.

Alas, like Barclays, this FTSE 100 stock has taken a hiding lately. At their 52-week high, also on 8 March, the shares closed at 311.13p. By 17 March, the share price had plunged to close at 226.6p. That’s a dive of 27.2% in nine days. Ouch.

On Monday, Legal & General shares closed at 249p, up 9.9% since their March low. This values the group at £14.9bn. Despite their modest rebound, these shares still seem far too cheap to me.

At current levels, L&G stock trades on a price-to-earnings ratio of below 6.9, for an earnings yield of 14.6%. That’s around twice the earnings yield of the wider FTSE 100.

What’s more, this share offers a bumper dividend yield of 7.7% a year — one of the highest in London. Even better, this cash yield is covered 1.9 times by earnings. Again, this suggests to me that this payout is safe — for now, at least. Indeed, L&G didn’t even cancel its dividend during 2020’s ‘pandemic panic’.

Of course, should financial markets take another battering, then L&G’s 2023 earnings could suffer. Most likely, its shares would follow suit. And like Barclays, this FTSE 100 stock is currently well out of fashion. Even so, I’d gladly buy more L&G shares today!

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D’Arcy has an economic interest in Barclays and Legal & General Group shares. The Motley Fool UK has recommended Barclays Plc. 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.

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