Top 3 Value Stocks With Strong Analyst Support and Growth Potential

Investing.com -- British stocks gained on Friday as the pound held firm against the dollar, with analysts saying the rally reflects a short squeeze rather than a fundamental reassessment of UK sovereign risk, while broader European markets traded in the green.

As of 1103 GMT, the blue-chip index FTSE 100 rose 0.2% and the British GBP/USD gained 0.5% against the dollar to above 1.33.

DAX index in Germany rose 0.6%, the CAC 40 in France gained 0.4%.

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UK round up

Bank of America has adjusted its European energy sector outlook for 2026, downgrading Shell PLC (AS:SHEL) and BP PLC (LON:BP) while double-upgrading Neste Oyj (HE:NESTE) as it positions for a "soft landing" in a $60 Brent oil price environment.

The bank’s analysts predict that lower oil and gas prices combined with declining refining margins will put pressure on free cash flow next year. They note that share prices across Europe’s major oil companies already reflect approximately $65 Brent long-term, suggesting limited potential for significant gains.

Shell shares were down 1.5%, while BP fell 2.4%.

In separate moves affecting UK-listed companies, Elementis PLC (LON:ELM) shares rose 4.7% after Bank of America upgraded the specialty chemicals company from Neutral to Buy. BofA increased its price target on Elementis from 170p to 200p, citing new management and strategic repositioning as growth drivers under CEO Luc van Ravenstein’s leadership.

Meanwhile, MONY Group PLC (LON:MONY) stock fell 2.9% following Morgan Stanley’s downgrade to Equal-weight from Overweight. The investment bank expressed concerns about how "agentic AI" might impact the UK price comparison website operator’s business model. Morgan Stanley maintained its 220p price target, representing about 15% upside potential, but indicated a lack of near-term catalysts for the stock.

Ocado Group PLC shares jumped around 10% in London trading after the company announced it will receive a $350 million cash payment from Kroger.

The payment comes after the U.S. retailer decided to close three robotic fulfillment centers and cancel plans for another site. Kroger will make the payment in January, reflecting its decision to shut three customer fulfillment centers (CFCs) in early 2026 and abandon the planned Charlotte, North Carolina facility.

In other UK market news, shares of Big Yellow Group PLC (LON:BYG) fell 5.4% after Blackstone Europe announced it would not proceed with a takeover offer for the company. The decision follows Big Yellow’s announcement on Thursday that it had concluded there was "no basis to continue discussions" with Blackstone and would not extend the put-up or shut-up deadline of December 8, 2025.

Blackstone confirmed in a regulatory filing that it has no intention to make an offer for Big Yellow, triggering restrictions under Rule 2.8 of the City Code on Takeovers and Mergers.

The UK housing market showed signs of cooling as house prices held steady in November, showing no monthly change after a 0.5% rise in October, according to the Halifax House Price Index. The average property price edged up by just £139 to reach £299,892, marking another record high despite the slowdown in growth momentum. Annual price growth decelerated to 0.7%, down from 1.9% in October, the weakest rate since March 2024.

In currency markets, sterling continues its upward trend. ING analysts suggest the current rally represents a short squeeze rather than a fundamental reassessment of UK sovereign risk. The bank noted that the 10-year Gilt swap spread has maintained its modest narrowing and currently stands at 48 basis points, down from 58 basis points in late September.

ING maintains a year-end GBP/USD target of 1.34 but expects some sterling underperformance against the euro as the Bank of England resumes its easing cycle this December.

In analyst actions, J.P. Morgan initiated coverage of UK food-to-go chain Greggs PLC (LON:GRG) with an "overweight" rating and a 2,110p December 2027 price target. This implies about 35% upside from the stock’s 1,590p close on December 4. The bank cited a valuation that has fallen to trough levels despite what it describes as sector-leading operating metrics and clear catalysts for recovery.

Separately, J.P. Morgan has adopted a more cautious stance on European oil and gas equities heading into 2026, citing tighter valuations and projected oil oversupply pressures.

In its EU Oils 2026 Outlook released Friday, the brokerage noted that the sector experienced "significant positive decoupling" during the second half of 2025. European oil stocks outperformed the broader European market by 6% despite weakening crude benchmarks, with Brent declining 7% during the same period.

J.P. Morgan now considers valuations to be "full," pointing to an estimated 2026 free cash flow yield of 7.8% at $62/bbl Brent, which it describes as rich compared to long-term averages.

Halma PLC (LON:HLMA) has acquired E2S Group Ltd for £230 million in cash, expanding its presence in industrial safety markets.

The acquisition will be funded from Halma’s existing facilities and supports the company’s continued expansion into fire detection and alarm systems.

Investing.com -- RBC Capital Markets on Friday laid out a selective investment strategy for UK and Irish banks heading into 2026, expressing a preference for small and mid-sized lenders while taking a more cautious stance on large institutions and Irish banks.

The brokerage rates the implied cost of equity for its UK and Irish bank coverage at 12.4%, compared to its own estimate of 11.9%, according to the report. RBC expects a three-year average total return yield of 10.1%, comprising a 5% dividend yield and 5.1% from buybacks, exceeding the consensus estimate of 9.5%.

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RBC’s preferred names include Metro Bank, OSB Group, Paragon Banking Group, Lloyds Banking Group and Barclays.

Lloyds Banking Group

Lloyds holds an “outperform” rating with a 110p price target, representing 15% upside from its 96p share price as of the report date. RBC forecasts the bank will deliver a 2027 adjusted return on tangible equity of 17.2% with a consensus price-to-tangible book value of 1.33x.

The brokerage favors Lloyds due to its longer-dated structural hedge, which provides more sustained income benefits as interest rates decline.

RBC notes the bank could provide guidance extending to 2030 next year, a move the brokerage believes the market will receive positively. The bank’s total shareholder returns for 2025-2027 average 11% annually, according to the report’s calculations.

Barclays

Barclays carries an “outperform” rating with a 525p price target, implying 20% upside from its 439p price as of the report. RBC positions Barclays as "the obvious catch-up trade for those who have missed the UK bank rally," according to the report. The bank trades at a 2027 consensus price-to-tangible book value of 0.86x with an expected adjusted return on tangible equity of 13.6%.

RBC’s 2027 pre-tax profit estimate of £11,920m sits 1% above consensus at £11.75 billion. The brokerage’s earnings per share forecast of 65.22p for 2027 exceeds the consensus estimate of 61.74p by 6%.

NatWest Group

NatWest receives a “sector perform” rating with a 725p price target, representing 17% upside from its 622p price. RBC expresses caution on the bank due to its shorter duration structural hedge swaps, a challenging comparison for other income, and likely conservative initial guidance for 2028 return on tangible equity.

The bank’s structural hedge has a weighted average residual life of 2.5 years compared to Lloyds’ 3.3 years. RBC forecasts a 2027 adjusted return on tangible equity of 18.9%, though the bank trades at a 2027 price-to-tangible book value of 1.38x.

HSBC Holdings

HSBC holds a “sector perform” rating with a 1,050p price target, implying a 2% downside from its 1,071p price. RBC struggles to identify a catalyst for the bank, expecting Chinese commercial real estate to continue weighing on performance. The brokerage’s 2027 pre-tax profit estimate of £36,667m sits 1% below consensus at £36,873m. HSBC’s reported earnings per share for 2027 are forecast at 1.64, compared to consensus of 1.66, representing a 1% gap. The bank maintains a 2027 consensus price-to-tangible book value of 1.36x with an adjusted return on tangible equity of 16.0%.

OSB Group

OSB Group carries an “outperform” rating with a 725p price target, representing 28% upside from its 567p price. RBC highlights that the bank could exit the minimum requirement for own funds and eligible liabilities regime in mid-December, with potential positive implications for pre-tax profit of approximately 10% and a one percentage point reduction in its CET1 target, according to the report. The bank trades at a 2027 consensus price-to-tangible book value of 0.82x with an expected adjusted return on tangible equity of 14.1%. OSB’s three-year average total return yield of 12% ranks among the highest in RBC’s coverage.

Metro Bank

Metro Bank holds an “outperform” rating with a 175p price target, implying 60% upside from its 110p price, the highest potential return among RBC’s UK coverage. The brokerage believes the market underappreciates that Metro Bank will likely deliver a mid-to-upper teens return on tangible equity by the fourth quarter of 2026, according to the report. The exit from the MREL regime could provide another four percentage points of uplift to return on tangible equity from fiscal year 2028, RBC estimates. The bank’s 2027 adjusted earnings per share forecast of 56.36p compares to consensus of 51.02p, representing a 10% premium.

Paragon Banking Group

Paragon receives an “outperform” rating with a 1,050p price target, representing 35% upside from its 778p price. RBC characterizes Paragon as "the highest quality/compound TBVps growth story in the sub-sector" and recommends buying the dip, according to the report. The bank trades at a 2027 consensus price-to-tangible book value of 1.04x with an expected adjusted return on tangible equity of 18.2%. RBC’s 2027 earnings per share estimate of 123.48p exceeds consensus of 119.09p by 4%. The bank’s three-year average total return yield of 13% leads RBC’s UK coverage.

Close Brothers Group

Close Brothers holds a “sector perform” rating with a 475p price target, representing 6% upside from its 448p price. RBC expects the bank’s shares could "tread water" until it has sufficient capital to pursue cost reductions more aggressively, according to the report. The bank’s 2027 adjusted earnings per share are forecast at 56.36p compared to consensus of 51.02p, a 10% difference. Close Brothers trades at a 2027 consensus price-to-tangible book value of 0.51x with an adjusted return on tangible equity of 6.5%.

AIB Group

AIB Group carries a “sector perform” rating with an €8.50 price target, representing a 3% downside from its €8.8 price as of the report date. RBC’s anti-consensus preference for AIB over Bank of Ireland is driven by several factors: a higher dividend and total return yield given greater excess capital, a higher market share in a concentrated attractive market, higher loan growth due to fewer legacy portfolios, a higher impairment overlay that should translate into lower cost of risk, more accessible gains from wealth growth, and greater upside versus consensus pre-tax profit, according to the report. The bank’s 2027 consensus price-to-tangible book value stands at 1.34x with an adjusted return on tangible equity of 15.7%.

Bank of Ireland

Bank of Ireland holds a “sector perform” rating with a €15.50 price target, implying a 2% downside from its €15.9 price. While RBC sees Irish bank valuations as relatively full, with a two-year forward price-to-tangible book value of 1.17x, up 70% versus the 0.69x historical average, the brokerage does not expect Bank of Ireland to underperform in fiscal year 2026 due to relatively high total return yields driven by excess capital, according to the report. RBC’s 2027 pre-tax profit estimate of €2,100m sits 2% above consensus at €2,062m. The bank maintains a 2027 consensus price-to-tangible book value of 1.37x with an adjusted return on tangible equity of 16.3%.

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Investing.com -- BofA Securities on Friday issued contrasting rating changes for four European defense manufacturers, with upgrades for two companies driven by surging order prospects and downgrades for two others facing near-term execution challenges.

French aircraft maker Dassault Aviation received an upgrade to “neutral” from “underperform,” with analysts Carlos Iranzo Peris and Benjamin Heelan raising the price objective to €274 from €290.

The upgrade hinges on Ukraine’s letter of intent to acquire up to 100 Rafale fighter jets, which could support production rates of approximately five aircraft by 2030.

"Ukraine potential order of 100 Rafale would, in our view, 1) support towards production rates of c.5 in 2030 and 2) provide significant upside risk to our FCF estimates," the analysts said. 

If Ukraine orders in 2026 with deliveries starting 2029, BofA estimates approximately €3.4 billion in cumulative cash inflows during 2026-2028.

For 2025, BofA projects Dassault revenue of €6,824 million with adjusted EBIT of €534 million, yielding a 7.8% operating margin and earnings per share of €11.76.

German defense electronics specialist Hensoldt received a downgrade to “neutral” from “buy,” with the price objective cut to €77 from €114. 

"2026 remains a transition year with slower topline growth versus peers," Iranzo Peris and Heelan said, noting approximately 10% organic growth in 2026 requires "a sharp ramp-up from 2027" to meet targets.

BofA reduced its valuation multiple to 13x EV/EBIT from 17.6x "as we reassess multiples across our coverage as part of our year ahead process," according to the brokerage. The analysts project 2026 revenue of €2.76 billion with adjusted EBIT of €399 million, representing an 11.8% margin.

German transmission systems manufacturer Renk Group received a double upgrade to “buy” from “underperform,” with the price objective rising to €60.50 from €56.50. The stock fell approximately 39% over six months versus sector declines of approximately 13%, the December 5 report stated.

"Renk now trades in line with sector multiples on 2028 BofA estimates despite a more attractive growth profile and greater margin expansion potential, mainly driven by VMS," the analysts said, referring to the Vehicle Mobility Solutions segment. BofA forecasts 2026 revenue of €1,535 million with adjusted EBIT margins of 15.3%, expanding to 16.9% in 2027.

Swedish aerospace and defense company SAAB also received a double upgrade to “buy” from “underperform,” with the price objective increasing to SEK565 from SEK471. 

"The pipeline of potential opportunities (driven by Aeronautics, Surveillance and to a lesser extent Kockums) is not yet embedded in consensus expectations," the brokerage stated, noting a potential Ukraine Gripen order could exceed SEK100 billion versus 2026 consensus orders of SEK126 billion.

BofA projects SAAB’s 2026 revenue at SEK92.11 billion with operating margins of 10.3%, supported by Gripen fighter jet production potentially reaching the high twenties by 2028 and GlobalEye surveillance aircraft deliveries ramping to four units annually by 2028.