Are these the best cheap shares to watch in 2025?
Despite a small dip in GDP in January, the UK economy is expected to grow by 0.3% in Q1, with further growth anticipated towards the latter half of 2025.
As the UK economy enters into a phase of interest rate cuts, higher GDP is likely to occur. That said, interest rates remain high and if inflation begins to creep up further rate cuts may be few and far between.
At its most recent meeting on 20 March, the BOE decided to hold interest rates at 4.5%. This comes after inflation rose to 3%, which is above the BOE’s target figure of 2%. Uncertainties around potential US tariffs and the impact they may have on the economy has also contributed to the bank’s caution.
Given these investment themes, here are five cheap shares we think may be worth keeping an eye on this Spring.
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Best cheap shares to watch
These cheap stocks have been selected as its P/E ratio is lower than the P/E ratio of its sector as a whole. Always do your own research. Past performance is not a guide to future performance.
Barclays (LON:BARC)
Despite rising in value by almost 50% in 2024, shares in Barclays are currently trading on a price earnings ratio of around 8.2, below the P/E ratio of the UK finance sector which currently stands at 8.9, indicating that the stock may still be undervalued.
The bank reported strong Q4 results with profit before tax increasing from £110 million to £1.3 billion and income rising by 24%. This was largely driven by improved cost control and fewer losses from unpaid loans.
Chief executive CS Venkatakrishnan recently announced a new plan to revitalise the business, which includes removing £2 billion from the cost base by 2026. He also revealed that the bank plans to return £10 billion to investors in share buybacks and dividends between 2024 and 2026.
Despite uncertainties surrounding the impact of potential US tariffs, in 2025, the economic landscape looks hopeful with the mortgage market beginning to strengthen and fewer people switching to higher-interest savings accounts.
Our analysts view the stock in a strong buy position where shares could reach 365p in the next 12—month period, up 20.20% from its current price.
Card Factory (LON: CARD)
Retail company Card Factory saw revenue reach £233.8 million in its H1 results, up 6% year—on—year and sales were up 9%. Although a rise in the living wage caused a 40% drop in operating profits, the company’s full year guidance remains unchanged with gains expected in H2.
Card Factory has a P/E ratio of 7.1, which is below the industry average of 10.5. Its P/B ratio is 0.9. These fundamentals suggest that Card Factory shares could be undervalued relative to its assets and its share price may increase in the months to come.
Our analysts have given the stock a strong buy rating with an average predicted upside of 90% over the next 12—month period.
Associated British Food (LON:ABF)
Food producer and owner of the Primark chain AB Foods reported a Q1. Its overall revenue remained stable at £6.7 billion. Revenue from Primark was up 1.9% to £3.4 billion where sales growth due to overseas expansion and new store openings helped offset sales offset the impact of UK sales dropping by 6.4%.
Its shares trade on a relatively reasonable price earnings ratio of 9.4, below the P/E ratio of the UK food and consumer staples industry as a whole which currently stands at 11.5.
Given the diversified business model of ABF, which is spread across multiple sectors, which helps minimise risk if one sector faces challenges, its shares could present a good opportunity for long-term investors.
Our analysts have given the stock a hold rating with an average price target of 2610p, up 12.35% from its current price.
Centrica (LON: CNA)
British energy company Centrica reported mixed full-year results with revenue falling by 25% due to price volatility and lower commodity prices. Underlying operating profit decreased by 44%, but this did beat market forecasts.
Despite these losses, the company remains on track to meet its medium-term profitability targets and market sentiment remains positive.
Centrica currently have a P/E ratio of 5.4, which is significantly below the average P/E ratio of the UK energy sector which stands at 12.0. This indicates that the stock may be undervalued and has growth potential.
Our analysts view the stock in a buy position with an average price target of 170p, up 18% from its current value.
B&M (LON: BMEB)
B&M delivered stable Q3 results with revenue rising by 3.5%, and UK revenues rising by 3.7%. The retail company had a strong Christmas period, especially in France where seasonal products brought in a revenue of 12.5%.
Looking ahead, B&M have plans to open 73 new stores in the next 2 years which could increase growth potential. With a P/E ratio of 8.4, which is below the industry average of 10.7 the company may be undervalued.
Our analysts view the stock in a buy position and anticipate that it could increase by as much as 62% over the next year.
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Keep in mind, leverage means you can gain or lose money faster than expected. Because your position size is far greater than your deposit, you could lose more money than you put in. Be aware also that past performance is not an indicator of future returns.
Best cheap shares to watch summed up
Given the current economic climate, with the UK economy entering into a phase where interest rate cuts are more likely, the above stocks have been identified as having growth potential.
These companies are just a small selection of top cheap stocks to buy in 2025. Remember that any company can also fail and always do your own research.
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*Based on revenue excluding FX (published financial statements, August 2024).
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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