20 value stocks for 2025

Whitbread, Barratt Redrow and International Airlines Group have been included on a 20-strong list of materially undervalued companies for investors to consider in 2025.

Peel Hunt’s selection also includes the “very cheap” B&M European Value Retail SA (LSE:BME), the strongly performing Keller Group (LSE:KLR) and the potential US tariffs beneficiary Coats Group (LSE:COA).

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A total of 12 sectors feature, with travel and leisure the most common with three names. The average market cap is £1.7 billion with a price/earnings multiple of 9.2 times for 2025.

The City firm said: “While we are not forecasting a sharp economic recovery in the next 12 months, we do believe the companies in this report are materially undervalued over the medium to longer term and consequently are worth revisiting.”

Peel Hunt’s choice of International Consolidated Airlines Group SA (LSE:IAG) follows a strong run for shares during 2024, fuelled by self-help measures and favourable conditions as the British Airways owner transforms itself into a higher-quality business that is less cyclical and highly cash generative.

The bank has upgraded forecasts six times in the last 14 months and sees further upside, with the potential for the group to return an additional four billion euros over the next three years.

IAG trades at less than six times forecast 2025 earnings: “We do not believe this adequately reflects the group’s improved quality, cash generation and capital returns.” Peel Hunt’s price target of 400p is based on a multiple of eight times.

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The support for Whitbread (LSE:WTB) via a target price of 3,750p reflects the view that the market continues to underappreciate the value of the assets, Premier Inn market leadership and German expansion.

Whitbread is operationally cash generative, allowing it to fund capital expenditure as well as plan for material cash returns through dividends and buybacks.

Peel Hunt said: “Investors own much more than a set of assets: they own the leading hotel company in the UK, in the most resilient segment of the market, the leasehold operations and the development pipeline.”

Barratt Redrow (LSE:BTRW) is on the list after last year’s Barratt Developments and Redrow merger created a business capable of building over 20,000 homes a year.

The Redrow brands adds a bigger, more expensive product to the range, and allows the group to tackle bigger sites more efficiently with three brands instead of two.

The bank believes that a turn in mortgage rates combined with planned synergies of at least £90 million should see the group post improved profits and returns. It has a price target of 585p, representing an upside of 39%.

Peel Hunt regards the business model of discounter B&M as one of the best in the retail sector, yet the multiple is one of the lowest at nine times 2026 earnings. It has a price target of 650p and believes the shares should appeal to all types of investor.

It added: “The B&M model is perfectly intact and there is an excellent growth and income story here, not to mention the fact that it scans well for value investors too.

“A special dividend is likely in January, and we have little doubt the shares will regather their poise in 2025, having been grossly oversold.”

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Elsewhere in the FTSE 250, industrial threads specialist Coats is seen as a potential beneficiary of additional US tariffs as key suppliers shift supply chains to mitigate any increases.

Peel Hunt said: “Coats has the broadest production footprint in the industry, providing greater flexibility to manage changes than peers. Further it has a strong presence in countries that would likely benefit from a supply shift.”

The shares are trading on 12.1 times 2025 earnings, which Peel Hunt believes offers excellent value for a global market leader, with high-teens margins and strong cash flow. It has a price target 38% higher at 130p.

The stock with the biggest forecast upside is beauty and nutrition consumer business THG Ordinary Share (LSE:THG), having completed the demerger of its Ingenuity e-commerce arm. The remaining operations are profitable and cash generative, with Peel Hunt forecasting a 240% boost for shares to 141p.

The next best are life science portfolio business Syncona Ord (LSE:SYNC), which has been backed to more than double to 225p, and Diversified Energy Co (LSE:DEC) based on a 115% upside to 3,000p.

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The investment bank said that Diversified, which is focused on the acquisition, production and retirement of natural gas assets in the United States, was at a compelling entry point after a sharp fall for shares since 2023. It added: “Robust and predictable cash flows and an enviable yield underpin DEC’s investment case.

“Further revenue streams add to this, including undeveloped land sales, more LNG agreements, and the recent expansion into coal mine methane capture and sale of environmental credits.”

Keller shares have risen more than 50% in the past year but today’s report highlights a further upside of 36% to 1450p for the ground engineer. Peel Hunt believes eight times 2025 earnings continues to leave the business “materially undervalued” given Keller’s market-leading position, strong cash flow and robust balance sheet.

The other stocks on the list are Auction Technology Group (LSE:ATG), Conduit Holdings Ltd (LSE:CRE), Kier Group (LSE:KIE), Mitchells & Butlers (LSE:MAB), MITIE Group (LSE:MTO), NCC Group (LSE:NCC), Rank Group (The) (LSE:RNK), RHI Magnesita NV Ordinary Shares (LSE:RHIM), Serica Energy (LSE:SQZ), Shaftesbury Capital (LSE:SHC) and TBC Bank Group (LSE:TBCG).