Are these the best cheap shares to watch in 2025?

Despite a strong performance during the first half of the year, GDP growth has slowed throughout the second half and is expected to reach 0.9% by the end of the year, but this could grow to 1.2% in 2025.

As the UK economy enters into a phase where interest rates are beginning to be cut, 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. The BOE is expected to hold interest rates at 4.45% at its next meeting on 19 December.

Given these investment themes, here are five cheap shares we think may be worth keeping an eye on this Winter.

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Best cheap shares to watch

These stocks have been selected as its P/E ratio is lower the P/E ratio of its sector as a whole. Always do your own research. Past performance is not a guide to future performance.

1. Barclays
2. Lloyds banking
3. JD Sports
4. Card Factory
5. HSBC

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 7.56, below the P/E ratio of the UK finance sector which currently stands at 7.86, indicating that the stock may still be undervalued.

The bank reported stronger than expected Q3 results with profit before tax increasing by 18% year—on—year to £2.2 billion and income rising by 5%. 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.

Heading into 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 321p in the next 12—month period, up 20.24% from its current price.

Lloyds Banking (LON:LLOY)

Lloyds banking has reported steady Q3 results where concerns over high interest rates causing borrowers to struggle never materialised. Net income dropped by 4% year—on—year but still exceeded market expectations. The same is true for pre-tax profits which decreased by 2%.

With interest rates on their way down, the mortgage market is likely to strengthen and Lloyds are seeing less customers switch to higher—rate savings accounts, which could positively impact profit margins.

Although the bank’s focus on lending means it’s more exposed to risk if customers fail to repay loans, its borrowers are holding up well. Lloyds are also working to expand other areas of the business such as investments, insurance and credit cards to minimise this risk.

The company have a P/E ratio of 7.49, below the industry average of 7.86 which suggests the stock may be undervalued.

Our analysts have given the stock a hold rating, with an average price target of 687p in the next 12—month period, up 1153% from its current price. JD

JD Sports (LON: JD.)

Sports retailer JD Sports reported mixed Q3 results where sales growth slowed to 5.4%, down from 6.4% the previous year as the company held firm on pricing. Whilst this helped boost margins, it lowered full—year profit expectations.

The company’s recent acquisition of US based company Hibbet has significantly increased its store count and helped it expand into America. Although these expansion plans prove costly and may impact short term profits, it also indicates a lot of growth potential in the next few years.

Many analysts believe the stock is currently undervalued and its recent acquisitions are not yet reflected in the share price. Its P/E ratio of 7.71 is below the P/E ratio of the industry median which currently stands at 13.96, further indicating growth potential.

Our analysts have given the stock a buy rating with an average price target of 131p over the next 12—month period, up 35% 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 7.21, which is significantly below the industry average of 14.37. Its P/B ratio is 1.1. 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 38.90% over the next 12—month period.

HSBC (LON: HSBA)

HSBC Holdings reported strong Q3 results where its total income was up 6% year—on—year and profit before tax reached $8.7 billion. This was largely driven by volatile fee and trading activities.

Heading into 2025 there are some concerns the unpredictable nature of this form of income and possible restructuring costs may impact profitability. This comes after new CEO Georges Elhedery has announced plans to simplify the business by splitting it into 4 main areas. More details are to come in February.

With global interest rates seeming to have peaked and the possibility of fresh tensions between China and the US, Elhedery has taken over the business at a difficult time and it’ll be interesting to see how he intends to generate growth.

The bank has a P/E ratio of 7.54, below the industry median of 7.86, indicating its shares may be undervalued. Our analysts have also given its stocks a buy rating with a price target of 771p in the next 12—month period.

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1. Learn more about cheap shares
2. Open an account with us or practise on a demo
3. Select your opportunity
4. Choose your position size and manage your risk
5. Place your deal and monitor your trade

You can either invest in shares directly or trade using spread betting or CFDs to benefit from leverage.

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.

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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, October 2021).