For many investors, the ideal time to buy cheap shares is during a stock market crash. When indices plunge, there are suddenly bargains everywhere, provided you have the courage to buy them, and the patience to wait for the recovery.
Many will have expected a crash this year, given concerns over the oil price spike, an AI bubble and the shadow banking sector. It hasn’t happened yet. However, I can still see plenty of FTSE 100 stocks trading at bargain valuations, as measured by their price-to-earnings (P/E) ratios.
How can I tell if a stock is cheap?
The P/E shows how much investors are willing to pay for every pound of profit. It’s a crude but useful way to gauge investor confidence.
P/Es change all the time, in line with share prices and company earnings. Across the FTSE 100, the average today is 16.2. Theoretically, it would take 16.2 years for the average UK blue-chip to earn back the price investors currently pay for its shares.
Once the P/E slips into single digits, it’s very much into bargain territory. So here are five companies I think worth investigating, with insanely low trailing P/Es.
- Reckitt Benckiser – 0.5.
- International Consolidated Airlines Group – 6.8.
- Lion Finance Group – 6.8.
- IG Group Holdings – 6.9.
- JD Sports Fashion – 8.7.
Often, a low P/E is a sign of a struggling company. That’s certainly the case with ‘King of Trainers’ JD Sports, where sales have been squeezed by the cost-of-living crisis. The JD share price may be a once-in-a-decade bargain as it now trades at 2016 levels.
By contrast, shares in British Airways owner International Consolidated Airlines Group are up almost 120% over five years. It almost went to the wall in the pandemic and I think investors are reluctant to bid the price too high as a result. So the P/E is just one factor among many investors must take into account.
Which is Reckitt Benckiser so cheap?
Consumer goods giant Reckitt Benckiser (LSE: RKT) easily has the lowest P/E on my list. The reason? Its shares now trade at 2014 levels, a staggering 12 years ago.
The £30bn multinational makes household, health and personal care products such as Dettol, Durex, Nurofen and infant formula Nutramigen. Like JD, it’s also been punished by the cost-of-living crisis. But the big culprit was its disastrous 2017 acquisition of Mead Johnson Nutrition, which left Reckitt facing a blitz of US lawsuits over its premature baby formula.
Reckitt’s now ultra-cheap with a trailing P/E of below one. But even this hasn’t sparked a recovery. Reckitt made a disappointing start to 2026, amid weak demand for seasonal cold and flu products. As inflation flares up, it could struggle to make headway, although the the board expects revenues to grow 4%-5% this year. It’s also trying to sharpen the company’s focus, by streamlining the business and beefing up its best performers.
With recovery potential and a tempting 4.7% trailing dividend yield, I think Reckitt is worth considering today. But I suspect we need a wide economic recovery before it can really crack on and push that P/E up.
Should you invest £5,000 in Reckitt Benckiser Group Plc right now?
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Harvey Jones owns shares in JD Sports and International Consolidated Airlines Group.
