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Investing in value shares has long been a popular strategy among contrarian investors. The FTSE market is full of companies trading near their all-time lows, but the challenge is separating genuine bargains from value traps.
Here are three UK-listed shares currently sitting near their historic lows. Are they worth a closer look?
Tullow Oil
Tullow Oil (LSE: TLW) has had a rough few years, but it’s not out of the game yet. The Africa-focused driller recently appointed a new chief executive, signalling a fresh start for the business. It also strengthened its balance sheet by $120m through the sale of its Kenyan assets and secured an extended licence in Ghana to 2040 — a key long-term boost.
However, production from its flagship Jubilee field slipped 32.8% to 11m barrels this year, largely due to maintenance shutdowns between March and April. That’s been reflected in its share price, which trades at just 10.2p – not far above its 7.16p low.
On paper, Tullow looks astonishingly cheap, with a forward price-to-earnings (P/E) ratio of only 2.42. But the low valuation comes with good reason. After a profitable 2024, it’s slipped back into the red, with just £141m in cash compared with £1.81bn in debt. Forecasts suggest little improvement in revenue or earnings for several years.
While I think risk-tolerant investors could consider it for a speculative turnaround play, its heavy debt and inconsistent profitability could still make it a tricky stock to hold long term.
Mobico Group
Mobico Group (LSE: MCG), the owner of National Express, is another name trading close to rock bottom. The transport operator’s shares have fallen around 90% in the past decade and currently sit at 27.82p — just above their 24.3p low.
Despite reporting £3bn in revenue, Mobico’s earnings collapsed by 610% year on year, resulting in an £824m loss. Its £3bn in assets and £1.48bn in debt highlight a stretched balance sheet.
Still, the company recently won a promising eight-year, €500m transport contract in Saudi Arabia.
The forward P/E ratio of 3.9 looks tempting, but unless profitability returns soon, that discount may not matter. Persistent losses, high debt and inflation-linked cost pressures make this one a value share that’s probably a bit risky to consider right now.
Synthomer
Synthomer (LSE: SYNT), a chemicals producer, might be the most interesting of the three. Trading at 59.6p, its barely above its 56.6p low having recently lost £72.6m despite generating £1.96bn in revenue.
Surprisingly, its balance sheet remains relatively sound, with assets outweighing liabilities and debt comfortably covered by equity.
Out of seven analysts tracking the company, the average 12-month price target is 111p — an 86% premium to today’s price. Earnings are forecast to rebound next year to 6p per share, which could signal a turnaround if demand for its speciality polymers picks up.
The main risk is that recovery may take longer than expected, particularly if industrial demand stays weak in Europe.
Still, I think it’s one of the more promising value shares to consider on the FTSE 250 right now.
The bottom line?
Value investing often requires patience and strong nerves. While these stocks are all trading near their lows, only a clear path to profitability will determine whether they become genuine bargains — or stay stuck in the bargain bin.
This story originally appeared on Motley Fool
