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With the FTSE 100 at record highs, the share prices of the UK’s elite stocks are high too. This creates a conundrum for the value investor. Where are the cheap shares?
While Footsie records are being broken, in earnings terms, we’re actually not far from normal levels. A price-to-earnings ratio of 15 is often thought of as the ‘fair value’ mark. Well, the FTSE 100 average is roughly 18. That means the cheaper end of the index may be hiding a few potential winners.
Looking at the latest figures for October 2025, there are eight companies in the UK’s biggest index with P/E ratios in single digits. Here are two that I think might be worth considering.
easyJet
First up, we have easyJet (LSE: EZJ). The airline currently trades at just 8.1 times earnings. This is significantly lower than historical averages too.
Why so cheap? Well, easyJet is facing a number of challenges. The black cloud of the pandemic still looms. That was a sharp reminder of how fragile our interconnected world is, and how quickly it can all fall apart.
The firm is paying much more for fuel too. Fuel costs make up 20%-30% of an airline’s expenditure these days. Wage costs in this country have been growing after the last Budget. And easyJet has 18,000 employees.
While there’s a lot of uncertainty, I can see positives here too. Earnings have bounced back since the pandemic. Earnings growth is expected for the next three years too. We’re looking at 9% next year and 12% the one after. I suspect the shares are a little lower than their true value. This is why I opened a position recently.
Barclays
Second on the list is banking giant Barclays (LSE: BARC) which trades at just 9.2 times earnings.
A curious point about P/E ratios is that they’re tied to share prices (it’s in the name: price-to-earnings ratio). All else being equal, if a share price halves, then its P/E halves too. So the shares with cheap-looking P/E ratios are often those that have been falling in value.
Not so with Barclays. The UK’s second-biggest bank has been surging of late, up nearly three times since 2024 began. The reason is that earnings have grown to match, making this (I think) one of the best FTSE 100 buys over the period.
Can the good times keep rolling? I believe so. Earnings are expected to grow in the next two years (by 9% and 37%). Analysts are bullish too with an average price target of 420p being an 11% increase on the share price at the moment.
One factor to keep an eye on is interest rates. If they come down quickly then Barclays will have less flexibility in its lending and borrowing, which will impact profits. On balance though, I think there’s a lot more good than bad here.
