Are These Two Undervalued Stocks the Hidden Gems of the FTSE 100?
While the FTSE 100 soars to record highs, savvy investors know that hidden beneath the surface are stocks trading at surprisingly low valuations. Today, I’m spotlighting two such opportunities that, despite their impressive performance, still look incredibly cheap based on their price-to-earnings (P/E) ratios—both below 10. But here’s where it gets controversial: are these stocks truly undervalued, or are investors right to be cautious? Let’s dive in.
NatWest Group: A Banking Giant at a Bargain Price?
NatWest Group (LSE: NWG) has been on a tear, with its share price surging 212% over the past five years. Yet, its recent dip of 7.3% in February—amid a 7.5% rise in the FTSE 100—has left its P/E ratio at a jaw-dropping 9.1. This is especially striking given NatWest’s stellar 2025 results: a 24.4% jump in full-year profits to £7.7 billion, a £750 million share buyback, and upgraded performance targets. So, why the sell-off?
And this is the part most people miss: Investors are wary of looming risks, particularly the potential impact of the AI revolution on corporate customers, as warned by JPMorgan Chase’s Jamie Dimon. Falling interest rates could also squeeze banking margins. But is this enough to justify such a low valuation? With a trailing dividend yield of 5.25%, NatWest looks like a steal—especially if geopolitical tensions in the Middle East cause market volatility next week. Could this be the perfect buying opportunity, or are investors right to tread carefully?
International Consolidated Airlines Group (IAG): Flying High or Grounded?
IAG, the parent company of British Airways, has seen its shares soar 25% in the past year and 170% over three years. Yet, despite posting record results for 2025—operating profit up 13% to €5 billion and revenue up 3.5% to €33.2 billion—its shares plunged 7.35% on Friday. Why the disconnect?
Investors are concerned about slowing cargo and passenger revenues, economic uncertainty, and the role of lower fuel prices in driving growth. Airlines are notoriously risky, vulnerable to wars, natural disasters, strikes, oil price swings, and recessions. With tensions in Iran threatening to spike oil prices, IAG’s future looks uncertain. But with a P/E of just 7.2, is this a buying opportunity for long-term investors, or a value trap?
The Broader Picture: More Hidden Gems?
NatWest and IAG aren’t the only FTSE 100 stocks trading at bargain valuations. JD Sports Fashion, with a P/E of 6.6, and easyJet, around 7, also look cheap. If geopolitical concerns weigh on markets next week, these stocks could become even more attractive. But the question remains: are these low valuations justified, or are investors missing out on hidden gems?
Thought-Provoking Questions for You:
- Are NatWest and IAG truly undervalued, or are investors right to be cautious about their risks?
- With geopolitical tensions rising, is now the time to buy cheap stocks, or should investors wait for clearer skies?
- What’s your take on the AI revolution’s impact on banks—a minor hiccup or a major threat?
Let’s spark a discussion! Share your thoughts in the comments below—I’d love to hear your perspective.
