5 of the cheapest UK shares to consider buying now

Some UK shares look too cheap. So here are five that seem worthy of deeper research and consideration now.

A turnaround may be coming

In the lead FTSE 100 index, telecommunications giant BT (LSE: BT.A) is changing hands due to a low rating. With the share price close to 146p, the forward-looking price-to-earnings (P/E) ratio is just under 7.9 for the trading year to March 2026. This compares to the average FTSE 100 rating at around 13.6.

However, BT presents risks, one of which is the mountain of debt on its balance sheet. Another is its uneven profit record, suggesting an uncertain path forward. Furthermore, BT operates in competitive markets.

However, the company announced this year that it has surpassed peak capital expenditure for its fiber broadband deployment program. Therefore, perhaps more of the company’s cash flow could be used for debt reduction and shareholder dividends.

Meanwhile, the expected dividend yield for next year is around 5.5%, which now offers shareholders a decent level of return. But if the company’s cash flow can drive dividend progression in the coming years, the increased payout could also help lift the share price.

BT could be on the verge of a lasting turnaround. However, City analysts predict flat profits next year after a decline this year. So there is a lot for the company to do. But that’s probably why the assessment seems undemanding.

The attractive financial sector

However, some of the large financial companies have low ratings, such as Legal and General and Aviva. At the time of writing (October 17), both have forward P/E ratings below 10 and forward dividend yields well above 7%.

In each case, City analysts predict robust increases in profits this year and next, with positive dividend progression as well.

However, the financial sector is cyclical and this can lead to wide swings in profits and share prices. Therefore, it would be easy to miscalculate when to invest in stocks and end up losing money.

Capital gains from rising stock prices over the long term may prove illusory. However, both have impressive ratings and trading numbers now.

In the broader financial sector, TP ICAP It looks like good value and could provide useful diversification in a stock portfolio. The company is a UK-based data and liquidity solutions company. But, once again, the business is exposed to cyclical risks and may never attract a higher valuation than it did.

An adventurous oiler

Another one to consider is the oil and gas company Serica Energia. City analysts’ earnings estimates are robust and all four brokers that follow the company have the stock as Buy or Strong Buy.

This isn’t a reason to buy the shares, but it makes the company worth investigating further. Meanwhile, the forward-looking P/E is just below three.

Of course, the oil sector is another cyclical sector, which adds risks. Additionally, small oil companies like this one can see big swings in their fortunes.

However, the trading numbers look good and the rating is low!