I’m searching for the best FTSE 100 shares to buy in February. And WPP (LSE: WPP) and Lloyds Banking Group (LSE: LLOY) have caught my eye.
Not only do they look mighty cheap from an earnings perspective. These two Footsie favourites also offer up some decent dividends. WPP’s yield sits at a handy 3%, while Lloyds’ is even fatter at 5%. The latter beats the FTSE 100 average of 3.5% by a healthy margin.
Both WPP and Lloyds’ share prices look incredibly cheap. But which of these would be the best stock for me to buy today? Let’s take a look.
A rebounding FTSE 100 stock
2021 was a strong year for media agencies like WPP as advertising spending bounced back. The firm’s latest financials showed like-for-like sales up 15.6% in the six months to September.
Fresh data from The Institute of Practitioners in Advertising suggests ad expenditure should remain strong this year at least too. The organisation predicts total spend will also rise a solid 5.2% in 2022.
So I believe WPP remains a great FTSE 100 stock for me to own. I’d even go on to say that I don’t think this is baked into the company’s low share price. City analysts think earnings here will rise 14%, resulting in a forward price-to-earnings growth (PEG) ratio of 0.9. A reading below 1 suggests that a share could be undervalued.
As a long-term investor, I’m concerned by many companies bringing their marketing and advertising operations in-house. WPP is also facing intense competition from other agencies as well as consultancies.
Still, it’s my opinion that these dangers are reflected in this stock’s low very-cheap share price. I think WPP’s considerable financial clout and industry-leading reputation across the globe — along with its increased focus in the fast-growing digital advertising market — will produce big shareholder returns over the long haul.
Is Lloyds worth the risk?
I’d be more reluctant to invest in cyclical, UK-focused shares like Lloyds Bank though. The outlook for the British economy continues to darken amid supply chain problems and soaring inflation. Indeed, in recent hours, the IMF cut its 2022 growth forecasts for the UK to 4.7%, from 5% previously.
In this environment the profits picture for banks like Lloyds is looking increasingly fragile. City analysts are expecting the bank’s earnings to drop 23% year-on-year in 2022. An even-more painful drop could be coming down the pipe if bad loans rocket and revenues growth stalls. Both of these are realistic scenarios to me as businesses and individuals feel the punch.
This is why I’m nonplussed that Lloyds’ share price looks cheap, based on current broker projections. Today, the FTSE 100 bank trades on a forward price-to-earnings (P/E) ratio of 8.3 times. I’m also concerned by the rising challenge established banks face from challenger banks like Monzo and Starling Bank.
So I’ll avoid lloyds. But I could be wrong, of course, as it has a strong position in the UK and is investing heavily in technology to exploit the digital banking boom.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Click here to claim your free copy of this special investing report now!
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
