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FTSE 100 Stocks have risen in recent months. This has been generated by an improved macroeconomic forecast and positive comments about Rishi Sunak’s premiership. Not to exaggerate, but Sunak’s quiet pragmatism has done wonders for my confidence in UK stocks.
Today I’m looking at two FTSE 100 stocks that are still trading significantly lower than they were one, two or three years ago.
Hargreaves Lansdown
Hargreaves Lansdown (LSE:HL) is the leading provider of investment platforms in the UK. It also offers financial services to its clients.
The stock had been on a fairly consistent uptrend in the years leading up to the pandemic. However, the Covid-19 lockdowns boosted investor activity and the Bristol-based company’s share price rose, topping 2,200 pence.
But pandemic-era growth proved unsustainable as the economy reopened and people went back to work. The stock, like other growth and technology stocks, had become very expensive. The company is now trading for less than 850 pence and with a price-earnings ratio of around 15.
However, to me, the stock is now woefully undervalued. Even during a cost of living crisis, the company is posting positive results. Net new business fell 30% to £1.6bn, but we are in the midst of a slump. Higher interest rates helped revenue grow 20% and the company increased active clients by 31,000 in the six months just ended.
In the near term, I expect more interest rate tailwinds. But in the long term, Hargreaves will continue to attract customers as Brits increasingly look to manage their own portfolios.
rolls royce
rolls royce (LSE:RR) has risen in recent months but is still well below its pre-pandemic highs.
The company, for which more than a third of revenue comes from large-engine flight hours, suffered during the pandemic. He sold business units and went through an efficiency drive to pay off debt and reduce overhead.
But Rolls surprised investors last month with better-than-expected results. It posted a statutory operating profit of £837m in 2022, considerably up from £513m a year earlier. Revenue grew to £13.5bn from £11.2bn. Rolls said it expected underlying earnings of £800m to £1bn this fiscal year.
Yes, there is still a long way to go in Rolls’ recovery. However, it is now back in the black and debt should start to fall to manageable levels if civil aviation continues its recovery. “In 2023, we assume a large number of engine flight hours at 80-90% of 2019 level and 1,200-1,300 total shop visits.the company said in its report.
The business has also seen strong growth in its other two core business segments. Order growth in the power systems segment rose 29% to £4.3bn. The defense is progressing well, the business says.
The metrics are also starting to add up, the company has a price-to-sales ratio below one and the potential for future earnings is attractive at the current share price.
I continue to buy Rolls-Royce shares because I believe the company has rallied more than the share price indicates. Shares are down 50% in five years.
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