Two undervalued British stocks for a growing UK economy

By James Dennin for Kapitall.

The economy in the United Kingdom is heating up, which is good news for Prime Minister David Cameron as he prepares to call another election that could allow him and his party to maintain power. 

Unemployment in the UK fell to its lowest levels in almost six years this summer, though wage growth was slow. That's prompted officials to keep interest rates low, even as employment starts to near capacity. 

Cameron has a lot of reasons to call the election soon (in the UK, elections are scheduled by the Party in power, usually every 4–5 years at a time when they are popular). British businesses are among the most confident in the world, and plans are currently in the works for England to build the first ever "space port," putting the country at the forefront of that nascent industry. 

With that in mind, we decided to screen for British stocks that looked undervalued. Since the economy there has grown, we looked for stocks whose growth in earnings has outpaced their growth in share price. 

To do that, we screened 50 British stocks that trade on US exchanges for  EPS/Price mismatches. This means that the average analyst estimate for the company's earnings per share has grown faster than its price. 

This left us with just two stocks on our list. Do you think the British economy will continue to outperform? Use the list below to begin your analysis, and let us know what you think in the comments. 

Click on the interactive chart to view data over time. 

 

1. Intercontinental Hotels Group plc ( IHG): Owns, manages, franchises, and leases hotels and resorts. Market cap at $9.89B, most recent closing price at $42.10.  

The EPS estimate for the company's current year increased from 1.52 to 1.64 over the last 30 days, an increase of 7.89%.

This increase came during a time when the stock price changed by 0.05% (from 41.94 to 41.96 over the last 30 days).  

 

2. National Grid plc ( NGG): Operates regulated electricity and gas infrastructure networks in the United Kingdom and northeastern United States. Market cap at $54.13B, most recent closing price at $74.77.  

The EPS estimate for the company's current year increased from 4.53 to 4.79 over the last 30 days, an increase of 5.74%.

This increase came during a time when the stock price changed by 2.66% (from 72.99 to 74.93 over the last 30 days).  

 

(List compiled by James Dennin. Monthly returns sourced from Zacks Investment Reserach, EPS data sourced from Yahoo! Finance. All other data sourced from Finviz.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

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