Finding cheap stocks is fundamental to successful investing. But price alone is no guide. A £1 stock could be massively undervalued and a £30 one might be a bargain. What matters is a company’s cash flow, earnings potential, and debt levels.
With this in mind, could this member of the FTSE 100, whose shares currently (1 June) change hands for around 85p, be significantly undervalued? Let’s see.
Who are we talking about?
JD Sports Fashion‘s (LSE:JD.) a familiar sight on Britain’s high streets and retail parks. But in recent years, it’s also expanded overseas. It now has 4,811 stores in 51 countries. Also, the retailer has successfully embraced the internet. Of its £12.7bn of revenue reported during the 52 weeks ended 31 January (FY26), 21% was generated online.
| Region | Stores | FY26 revenue (£m) |
|---|---|---|
| North America | 2,519 | 4,779 |
| Europe | 1,562 | 4,246 |
| UK | 615 | 3,110 |
| Asia Pacific | 115 | 527 |
| Totals | 4,811 | 12,662 |
But the group appears to have fallen out of favour with investors. Concerns about the lack of growth in the athleisure market, and the potential impact of artificial intelligence (AI) on the career prospects and disposable incomes of the group’s target demographic of 18-to-24 year-olds, appear to be weighing heavily.
Although the group’s been growing through acquisition, its like-for-like sales performance has been disappointing. And problems at Nike – a key JD Sports parter – haven’t helped either.
Price is what you pay. Value is what you get.
Warren Buffett
A bargain hiding in plain sight?
However, I believe the stock continues to offer tremendous value for money which, in my opinion, makes me think it’s worth considering by those looking to bag themselves a bit of a bargain. Don’t believe me? Let’s see.
During FY26, the company reported adjusted earnings per share of 11.7p. This means the stock trades on just 7.2 times historic earnings. The five-year median is 13.9.
However, cash is a more reliable measure. Here, analysts are expecting free cash flow (FCF) as follows:
- FY26 – £434m
- FY27 – £495m
Let’s take the average of these two numbers (£465m) and divide it by the number of shares currently in issue (4.84bn). This gives FCF per share of 9.6p. What does this mean?
A good deal?
Well, it suggests that for every share in existence, JD Sports has 9.6p available to either return to shareholders, reinvest for growth, or pay down debt. Given that each share currently costs around 85p, this tells me that the group’s in pretty good shape financially.
And I think the death of its market has been greatly exaggerated.
Yes, other sectors are likely to grow faster but Adidas has proven that if a company can get its products right, it can deliver some impressive results.
During the first quarter of 2026, the German sportswear giant reported a 14% increase in revenue and an 11% rise in net profit compared to the same period a year earlier. Nike may be the biggest revenue earner for JD Sports but the British retailer is brand agnostic.
Admittedly, it’s likely to be more of a slow burner than an overnight sensation, but I think the JD Sports share price significantly undervalues the company. I believe it’s one of many cheap UK shares currently available for investors to consider.
Should you invest £5,000 in JD Sports Fashion right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if JD Sports Fashion made the list?
James Beard owns shares in JD Sports Fashion plc.
