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Yesterday (10 June), the FTSE 100 eclipsed the record highs from March this year. The 7.9% rally over the past year has been anything but smooth. Yet some might think that it’s time to sit in cash and wait for another stock market crash. I disagree and think several FTSE 100 stocks still offer great value. Here are two to consider.
On solid foundations
The first one is Persimmon (LSE:PSN). The leading UK housebuilder has experienced a 4.5% share price drop over the past year. I think it offers good value as it’s a way off its 52-week highs. From a valuation perspective, the price-to-earnings ratio is 14.98, below the index average of 16.
When looking at the fundamentals, I think the business has a positive outlook. Back in January, the annual report showed the company’s forward sales position increased by 8% to £1.15bn. This was driven mainly by a 31% pop in private forward sales. The latest trading update from May backed up the momentum, citing that “at this stage we remain on track to deliver further growth in completions to between 11,000 and 11,500 for the full year”.
With interest rates likely to keep falling in the second half of the year, mortgages should become more attractive. This, in turn, should help the business sell more properties and build a solid pipeline.
As a risk, the update mentioned that the management team is “mindful of the current economic uncertainties”. Any downturn in the UK economy or general consumer concern about the global economy could cause some to hold off on buying a property.
DIY in focus
The second stock is Kingfisher (LSE:KGF). At 273p, it’s some way off its 52-week highs of 332p. The current price-to-earnings ratio is 13.21, again below the index average.
The company makes money by selling home-improvement products across a network of 1,300 stores under brands like B&Q and Screwfix. Q1 sales showed a good start to the year, with UK and Ireland revenues up 6.1% versus last year to £1.73bn, with like-for-like sales up 5.9%. It also noted strong market share gains in Europe, focused on France and Poland.
I think the stock is good value and isn’t overpriced, even with the record-high index. The management team commented that overall consumer sentiment is mixed right now. Yet if we do see lower interest rates, an easing in tariff tensions, and the usual seasonal demand boost, I believe the stock can outperform for the rest of the year.
Of course, one concern is the impact of inflation, if it picks up later this year. Kingfisher sources a lot of products from China, so any supply chain disruptions could provide a headache as well.
I think an investor can consider both stocks as a way to get potential value picks despite the index being at record highs.
