The FTSE 100 could climb to 11,668 points over the next 12 months, according to the latest forecast covered in the source material. That would imply further upside from recent levels and keeps attention on UK shares that still look reasonably valued.
The index may be near record highs, but not every FTSE 100 share looks expensive. Some companies still trade on modest valuations because investors remain cautious about earnings, interest rates, consumer spending and balance sheet risk.
Marks & Spencer is one example. The retailer has recovered strongly in recent years, but its shares have had a weaker 12 months. A cyber-attack disrupted the business and contributed to a 28.8% fall in pre-tax profit. That is a clear risk, not a minor issue. Investors now need to judge whether the disruption was a one-off setback or a sign of deeper operational vulnerability.
The current valuation suggests the market is still applying some caution. Marks & Spencer trades on a forward price-to-earnings ratio of 11.8 times, compared with Tesco at about 15.3 times. That does not automatically make the shares cheap, but it does show that expectations are lower. If sales and profits continue to recover after the disruption, the shares could attract more interest.
The main risk is the consumer backdrop. Higher oil prices, inflation pressure or slower interest rate cuts could all weigh on household spending. That would make it harder for Marks & Spencer to rebuild momentum. Even so, the company’s interest costs were covered 3.1 times by operating profits, which gives some comfort that its finances are not overly stretched.
British Land offers a different case. The shares have fallen around 20% over five years and now trade at a price-to-book ratio of 0.7. That means investors can buy exposure to the company’s property assets at a discount to book value. The dividend yield of 5.6% also gives the stock an income appeal.
The discount exists for a reason. British Land is exposed to interest rates, property valuations and debt costs. Its loan-to-value ratio is 39.2%, which investors should watch closely. If rates stay higher for longer, the shares may remain under pressure.
However, there is also a clearer upside case. Earnings per share rose 1% in the latest full year, while net profits are expected to grow by 6% in the current year and by 3% to 6% a year after that. Management is also selling lower-return assets and moving capital into higher-return areas.
Fidelity Special Values PLC (LON:FSV) aims to seek out underappreciated companies primarily listed in the UK and is an actively managed contrarian Investment Trust that thrives on volatility and uncertainty.
