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The United Kingdom's stock market has recently faced challenges, with the FTSE 100 and FTSE 250 indices experiencing declines amid weak trade data from China, highlighting global economic uncertainties. As these broader market conditions unfold, investors may find opportunities in stocks that are trading below their estimated value, offering potential for growth when fundamentals align with favorable entry points.
Top 10 Undervalued Stocks Based On Cash Flows In The United Kingdom
| Name | Current Price | Fair Value (Est) | Discount (Est) |
| Foresight Group Holdings (LSE:FSG) | £3.41 | £6.32 | 46% |
| Aptitude Software Group (LSE:APTD) | £2.62 | £5.19 | 49.5% |
| Gooch & Housego (AIM:GHH) | £3.75 | £7.17 | 47.7% |
| NIOX Group (AIM:NIOX) | £0.592 | £1.09 | 45.6% |
| Franchise Brands (AIM:FRAN) | £1.31 | £2.45 | 46.5% |
| Trainline (LSE:TRN) | £2.862 | £5.21 | 45.1% |
| Deliveroo (LSE:ROO) | £1.344 | £2.69 | 49.9% |
| Kromek Group (AIM:KMK) | £0.052 | £0.10 | 48.9% |
| Ibstock (LSE:IBST) | £1.772 | £3.28 | 46% |
| CVS Group (AIM:CVSG) | £10.12 | £18.62 | 45.7% |
Let's explore several standout options from the results in the screener.
Bellway
Overview: Bellway p.l.c., with a market cap of £2.95 billion, operates in the United Kingdom as a homebuilding company through its subsidiaries.
Operations: The company's revenue is primarily generated from UK House Building, amounting to £2.54 billion.
Estimated Discount To Fair Value: 21.8%
Bellway p.l.c. appears undervalued based on cash flows, trading at £24.88, below the estimated fair value of £31.81. Recent earnings for the half year show sales of £1.43 billion and net income of £100.4 million, reflecting solid growth compared to the previous year. Analysts anticipate significant annual profit growth of over 20%, outpacing both revenue forecasts and market averages in the UK, despite a low future return on equity forecast at 8%.
Phoenix Group Holdings
Overview: Phoenix Group Holdings plc operates in the long-term savings and retirement business in Europe with a market cap of £5.78 billion.
Operations: The company's revenue segments include Retirement Solutions generating £4.46 billion, while With-profits, Europe and Other, and Pensions & Savings segments reported negative revenues of -£711 million, -£785 million, and -£562 million respectively.
Estimated Discount To Fair Value: 29.9%
Phoenix Group Holdings is trading at £5.79, significantly below its estimated fair value of £8.25, suggesting undervaluation based on cash flows. Despite a net loss of £1.09 billion reported for 2024, the company is forecast to become profitable within three years and achieve high return on equity (79.6%). However, revenue is expected to decline annually by 23.9%, and its dividend yield of 9.46% remains unsustainable against current earnings levels despite a recent increase in payout.