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The FTSE 100 has enjoyed a solid run in 2025 so far, with investor sentiment buoyed by easing inflation and the prospect of lower interest rates. But despite the broader rally, there are still pockets of value hiding in plain sight. Some stocks continue to trade on modest valuations, even as their financials and share prices show signs of recovery.
By focusing on classic valuation metrics like the price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and price-to-earnings growth (PEG) ratio, investors can identify quality companies trading below their perceived worth.
Here are two cheap FTSE 100 stocks that I believe investors should consider as we head into the second half of 2025.
BT Group
As the UK’s largest telecommunications firm, BT Group (LSE: BT.A) needs no introduction. It’s provided analogue and digital communication services across the country for almost 180 years. After a long period of underperformance, the shares have staged a comeback in 2025, rising 34% this year to around 190p, bringing the company’s market-cap to £18.78bn.
Yet despite the rally, the shares still look inexpensive. The P/E ratio stands at 17.9, while the PEG ratio’s just 0.7, suggesting that earnings growth may be underappreciated by the market. Meanwhile, a P/S ratio of 0.94 implies that investors are paying less than £1 for every £1 of revenue — an encouraging sign for value seekers.
BT’s also proving attractive for income investors, with a dividend yield of 4.2% and a sustainable payout ratio of 75.7%. Operationally, the company’s on solid ground, posting an operating margin of 16.3% and a return on equity (ROE) of 8.3%.
Still, investors shouldn’t ignore the risks. Its debt-to-equity (D/E) ratio’s a high 1.81, which leaves BT exposed to rising financing costs. There are also challenges from regulatory price controls and the massive capital expenditure required for full-fibre broadband rollouts. These factors may limit how much shareholder value it can return in the near term.
Still, for value investors, I feel it’s one of the most promising-looking stocks on the Footsie right now.
Centrica
Centrica (LSE: CNA), the parent company of British Gas, operates in energy supply, trading and storage. Shares have risen 13% in 2025, currently trading at 165p, with a market-cap of £7.8bn. Unlike many peers, Centrica has emerged from the energy crisis with leaner operations and a sharper focus on profitability.
Valuation-wise, the stock appears undeniably cheap. The P/E ratio’s just 6.67, the P/S ratio’s 0.42, and the price-to-free cash flow ratio stands at 7.37. These figures suggest the market has yet to fully price in Centrica’s improved fundamentals.
It also boasts an excellent operating margin of 28.3% and a superb ROE of 32.1%. The dividend yield’s modest at 2.7% but the payout ratio’s just 17.8%, leaving significant room for future increases. Debt’s also well under control, with a D/E ratio of 0.78.
As always, risks remain. Centrica’s exposed to volatile energy markets, political scrutiny over pricing and the transition to renewable energy, which may require large-scale investment in the years ahead.
Overall, I think both stocks are currently undervalued, with a good chance of ending this year higher.
This story originally appeared on Motley Fool
