Value investing has been out of favour for a while now. However, there have been signs recently that it could be making a comeback. As a result, Mirabaud Securities recently put together a list of European value stocks it believes have 50% upside on a three-year view. Heres a look at three FTSE 100 stocks that made the list.
WPP
Advertising giant WPP (LSE: WPP) was one FTSE 100 stock that made it, and this isnt surprising in my view, as the shares have fallen significantly over the last few years, currently trade on a low P/E ratio of just 9.7. Even if the stock rose 50% from here, it would still only trade on a P/E ratio of 14.5, which isnt high for a company with WPPs track record.
After a difficult few years in which the advertising industry has been disrupted by technology companies, and influential CEO Martin Sorrell has left the company, WPP appears to be turning things around slowly. For example, just last week, the group announced in an AGM statement that new business performance has been solid, with notable client wins including Adidas, Duracell, GSK, and LOral. The company also advised its sale of Kantar is progressing in line with its expectations.
With WPP shares currently yielding 6.2%, I see a lot of value on offer right now and I think theres definitely potential for upside.
Aviva
Another out-of-favour FTSE 100 value stock that made Mirabauds list was insurance group Aviva (LSE: AV). Like WPP, it also currently trades at a low valuation its forward-looking P/E ratio is a rock-bottom 6.7.
As my colleague Rupert Hargreaves recently pointed out, Aviva has lacked direction recently. For a while there, it didnt even have a CEO, so its no surprise the shares have languished. However, in March, the group appointed Maurice Tulloch as chief executive, and hes already announced plans to cut costs and split up the companys life and general insurance businesses to enhance the groups focus. So it looks like Aviva is heading in the right direction.
With a high prospective dividend yield of 7.8% on offer right now, I think Aviva shares have the potential to rise in the years ahead.
Schroders
Finally, investment management Schroders (LSE: SDR) also made the list. Now, Im a big fan as the company has an excellent reputation within the investment management industry and it also has a fantastic dividend growth track record.
I own the non-voting shares myself. However, to be honest, I would be surprised if the stock was able to climb 50% in the next three years, given we are already 10 years into the current bull market. Its not impossible, of course, given that the shares currently trade on a P/E ratio of nearly 15, a 50% gain from here in the space of 36 months is asking a lot of the shares.
Thats not to say the stock isnt a good buy right now. A P/E of 15 for Schroders is quite reasonable, in my opinion, and with a yield of 3.8% on offer (4.7% if you buy the non-voting shares), I think the stock is capable of providing solid total returns for investors in the years ahead.
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