Top Undervalued UK Stocks Of 2026

Undervalued stocks and shares are abundant in the world of investing. And for the skilled investor able to identify them, a lot of money can be made. Of course, that’s easier said than done. Plenty of companies look “cheap” for a good reason. And these traps can often lead investors astray. 

Let’s take a high-level tour of the complex world of valuation, uncovering some of the more promising value investment opportunities available.

What are undervalued stocks?

Undervalued stocks are businesses whose shares are trading below their underlying intrinsic value. With mood and momentum being the primary driving forces behind stock prices in the short term, discrepancies between price and value occur constantly. And being able to identify such opportunities can be a highly lucrative endeavour.

These terms, “price” and “value”, are often used synonymously in everyday life. But in the realm of finance, there is a stark difference between the two.

To quote famous investor Warren Buffett, “Price is what you pay. Value is what you get”. Buffett is probably one of the most successful value investors alive today. He made his multi-billion-dollar fortune by identifying strong businesses whose share prices were trading below the true worth of the underlying company and then investing in these undervalued stocks.

Top undervalued shares in the UK 

Here are some of the most popular undervalued stocks on the London Stock Exchange in 2026.

Standard Chartered

Banking stocks have historically benefited from higher interest rate environments, which expand lending margins and boost profitability. For many UK investors, Lloyds is often the go-to bank investment idea. However, Standard Chartered has been making increasingly compelling waves of its own.

After years of scepticism about management’s ability to deliver on its targets, the group has made its case convincingly. In its full-year 2025 results, Standard Chartered reported an underlying return on tangible equity (RoTE) of 14.7%, exceeding its 13% target a full year ahead of schedule and marking the bank’s strongest performance since before the Global Financial Crisis. Underlying profit before tax reached $7.9bn, up 18% year-on-year, while total operating income grew 6% to $20.9bn.

Despite this strong operational delivery, the stock continues to trade at a valuation that many analysts consider to be below intrinsic value, suggesting the market has yet to fully price in the group’s improved execution record.

Whether the momentum can be sustained will depend on macroeconomic conditions in Standard Chartered’s core Asian markets, but the investment case has become considerably more concrete over the past two years.

Imperial Brands

Imperial Brands is one of the UK’s largest tobacco companies, generating most of its revenue from selling cigarettes. However, in recent years, management has been diversifying its strategy by bringing healthier next-generation products onto the market, such as heated tobacco, oral nicotine, and vaping devices.

As of April 2026, the stock continues to trade at a modest price-to-earnings ratio of approximately 10–11x – a slight re-rating upward from where it stood a year ago, but still cheap by most market standards.

Like most tobacco companies, the business has long looked undervalued, largely because some investors remain reluctant to hold shares in a company whose core products are known to be a risk to health.

But that same reluctance continues to suppress the valuation and drive a substantial dividend yield, which returns significant capital to shareholders each year.

Centrica

Centrica is a leading energy and utilities service provider in the UK. Beyond supplying gas and electricity, the group offers a collection of plumbing, drainage, and heating services through its numerous subsidiaries, including British Gas, Dyno, and PH Jones.

After the exceptional windfall profits of the 2022/23 energy price surge, Centrica’s earnings have normalised considerably, with adjusted EBITDA for H1 2025 falling 37% to £900m as wholesale energy prices retreated.

Despite this earnings reset, the group’s financial position remains robust. Centrica ended 2025 with a net cash position of £2.5bn, and management rewarded shareholders with a rising dividend of 5.5p for the full year 2025, up from 4.5p the prior year.

The pullback in earnings has weighed on the share price, but for investors focused on the long term, the group’s strong balance sheet, diversified service offering, and shareholder-friendly capital allocation policy make it a potentially interesting value proposition at current levels.

easyJet

easyJet’s post-pandemic recovery is now substantially complete. The group reported a headline profit before tax of £665m for FY25 (the year ending September 2025), its third consecutive year of improving profitability, with total revenues surpassing £10bn for the first time.

Industry passenger capacity has not only recovered to pre-pandemic levels but has grown beyond them, and easyJet has continued to capture its share of that growth.

The investment case has therefore shifted from one of recovery potential to one of sustained earnings growth. The group’s holidays division has become an increasingly important profit contributor, growing strongly alongside the core airline business.

Meanwhile, with interest rates now on a downward trajectory from their 2023/24 peak, the burden of higher borrowing costs is gradually easing.

Like many other airline stocks, easyJet is not without risk — geopolitical uncertainty, volatile fuel costs, and the sensitivity of consumer travel spending to economic conditions all remain factors to watch.

But for investors who believe the stock’s valuation does not yet fully reflect its restored earnings power, easyJet continues to represent a potentially interesting opportunity.

How to find undervalued stocks

There are two common methods to determine value:

1. Relative Valuation (Multiples)

Starting with the easiest of the two, the relative valuation method doesn’t actually try to pinpoint the value of a company. Instead, it compares it with other businesses operating in the same or similar industry to see at what price point the shares are trading relative to another stock.

This is where financial metrics such as the price-to-earnings ratio and price-to-sales ratio step in. Stocks trading at a P/E or P/S ratio below the industry average are considered undervalued. Similarly, those trading above the average are considered overvalued.

2. Intrinsic Valuation (Discounted Cash Flow Models)

The problem with the relative valuation method is that it makes many broad assumptions. Every business is unique in some way, which can skew results when compared with other companies, even if they operate in the same space. It’s entirely possible for a stock to trade above its industry average and still be undervalued.

This is where intrinsic valuation comes in. Unlike the relative, this method attempts to estimate the underlying value of a company based on the present value of its future cash flows using something called a Discounted Cash Flow model (DCF).

DCFs are a bit of a rabbit hole. But in oversimplified terms, an analyst forecasts the revenue stream for the next 5-10 years along with profitability to calculate the group’s future cash flows. These cash flows are then discounted back to present-day value at a rate reflecting the risk level associated with the stock. 

Calculating a sensible discount rate in and of itself can be a challenge. A typical go-to figure is 10%, but this can often be too little or too much, depending on the company. 

Once cash flows have been translated into present-day value, it’s then converted into equity value, which is the equivalent of market capitalisation. This can then be compared to the current share price to determine whether a stock is undervalued or not.

Needless to say, intrinsic valuation is far more time-consuming and challenging than relative valuation. However, it’s also more reliable, providing the analyst can produce accurate and reasonable forecasts – something that can be challenging to achieve.

Finding undervalued stocks in international markets

The core principles in identifying undervalued stocks and shares in international markets remain pretty much the same. However, there are some key differences to be aware of.

Depending on the location, the difficulty of accessing additional capital, either through debt or equity, can vary wildly.

If taking a relative valuation approach, performing a multiples comparison against other related companies operating in the same country is important.

If taking an intrinsic valuation approach, the discount rate needs to be adjusted to reflect both the difficulty of accessing capital and the risks of operating in certain countries. 

For example, accessing capital as a business in the US is far easier than in Brazil. But there is also the factor of the operating environment to consider. An American oil company might have easy access to funds, but if drilling is actually done in a more politically unstable region, the risk and impact of potential disruption need to be reflected in the discount rate.

Are undervalued stocks right for you?

Legendary investor Charlie Munger once said all investors are value investors. And in many respects, he’s absolutely right. After all, we’re all trying to pay a low price today to eventually sell at a higher price in the future. However, being a value investor requires a lot of knowledge and, more importantly, patience.

Undervalued stocks and shares can continue trading below their true value for months or even years. And it’s easy to lose faith in your original valuation model. After all, there is always the possibility that you were wrong. That’s why this strategy is not suitable for everyone. But for those who dare to go against the crowd and arm themselves with detailed analysis updated as new information comes to light, achieving long-term, market-beating investment returns becomes far more achievable.