Down 29%, here’s one of my favourite cheap FTSE 100 shares this November

With a P/E ratio of just over 10 times, I think this might be one of the best FTSE 100 bargain shares for long-term investors to consider.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100‘s risen a healthy 7% in 2024 as enthusiasm for UK shares has improved. But not all British blue-chips have had an enjoyable ride since the turn of the year.

B&M European Value Retail‘s (LSE:BME) fallen more than a quarter in value so far this year.

I wouldn’t rule out further share price weakness for the rest of the year or even during 2025 either. But as a long-term investor, I’ll consider buying it when I next have spare cash to invest.

Here’s why.

Fallen angel

A 29% share price decline in 2024 has seen B&M’s forward price-to-earnings (P/E) ratio topple to 10.5 times. This is well below the FTSE 100 average of 15 times. And it’s a multiple I believe is far too low.

Investors were spooked in June by the retailer’s failure to offer guidance for this financial year (to March 2025). And it’s failed to recover ground since then, with latest results showing a 3.5% decline in like-for-like sales from April to June.

I believe the scale of the sell-off’s impact hard to justify. B&M hit the top end of forecasts for the last fiscal period. And it’s looking good to continue delivering robust growth as its hugely profitable expansion programme rolls on.

Growth plan

Today, B&M sells its cut-price product ranges from 755 stores. That’s up from 499 back in 2016. Over this period, both sales and earnings have soared, as the charts below show.

B&M's revenues growth.
Source: TradingView
B&M's earnings growth.
Source: TradingView

Given this success, it’s perhaps no surprise that B&M’s accelerating its growth programme.

Earlier this year it announced “a new, long-term store target of not less than 1,200 B&M UK stores, a significant increase from the 950 we had guided to previously“.

It plans to cut the ribbon on another 90 stores in the next two financial years alone. This could take group earnings growth to the next level.

There’s always the risk that the company expands too quickly, eroding shareholder value in the process. But encouragingly, B&M has a great track record of execution that continues to this day.

It said in July that “all stores opened since last year are performing ahead of expectations“.

More to come

I can see why investors are more nervous about B&M looking ahead. Competition’s intensifying, and especially as inflation fades and shoppers move towards more expensive operators.

These have certainly impacted the retailer’s trading performance more recently. However, the firm’s 3.5% like-for-like sales decline in the first quarter should also be seen in the context of strong comparatives a year earlier. Back then, corresponding revenues leapt 9.2% year on year.

It’ll have to paddle extremely hard to keep growing profits looking ahead. But I’m confident B&M — whose share price has risen 67% since 2016 — can keep delivering excellent shareholder returns as expansion revs up.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. 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.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

Up 17% in a day with a 6% dividend yield? I just had to investigate this unusual penny stock

It’s not every day you see a cheap penny stock with a decent yield and enjoy a sudden growth spurt.…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

As Apple reports record Q3 sales, why’s the share price going down?

The Apple share price is falling but Stephen Wright thinks there’s plenty for shareholders to be positive about – leaving…

Read more »

Market Movers

In 1 word, here’s why the Amazon share price is rising after Q3 earnings

As revenues grow 11%, the Amazon share price is on the up. But Stephen Wright thinks that's only part of…

Read more »

Investing Articles

A UK share with a growing dividend and a yield over 10%

Roland Head looks at a UK share with a double-digit dividend yield and gives his view on whether this jumbo…

Read more »

Middle-aged black male working at home desk
Investing Articles

Fancy a £1,640 second income in 2025? These FTSE 100 and FTSE 250 shares could deliver it

With yields well above the FTSE average, these dividend stocks are tipped to deliver a blistering second income next year.

Read more »

Investing Articles

This ETF is soaring as the gold price booms! Is it time to buy?

Investing in an exchange-traded fund (ETF) like this could be an easy, cheap, and lucrative way to ride the gold…

Read more »

Value Shares

Is there value in the Lloyds share price after a 14% drop?

Lloyds’ share price has just fallen by more than 10% in the blink of an eye. Is it now in…

Read more »

Edinburgh Cityscape with fireworks over The Castle and Balmoral Clock Tower
Investing Articles

Best British dividend stocks to consider buying in November

We asked our writers to share their top dividend stock for November, including two insurance companies...

Read more »