The UK's FTSE 100 index has recently faced downward pressure, influenced by weak trade data from China and declining commodity prices, which have impacted key sectors. Despite these challenges, discerning investors can still find opportunities in undervalued stocks that may offer potential for growth and stability in a fluctuating market environment.

Top 10 Undervalued Stocks Based On Cash Flows In The United Kingdom

Click here to see the full list of 57 stocks from our Undervalued UK Stocks Based On Cash Flows screener.

Here we highlight a subset of our preferred stocks from the screener.

Franchise Brands

Overview: Franchise Brands plc, with a market cap of ￡307.77 million, operates in franchising and related activities across the United Kingdom, North America, and Europe through its subsidiaries.

Operations: The company's revenue segments include Azura (￡0.81 million), Pirtek (￡60.78 million), B2C Division (￡5.95 million), Filta International (￡25.64 million), and Water & Waste Services (￡49.17 million).

Estimated Discount To Fair Value: 40%

Franchise Brands (￡1.6) is trading significantly below its estimated fair value of ￡2.67, representing a 40% discount. Analysts agree on a potential price rise of over 100%. The company's earnings grew by 82.8% last year and are forecast to grow at an annual rate of 44.22%, outpacing the UK market's expected growth (14.5%). Recent half-year results showed sales of ￡69.8 million and net income of ￡3.62 million, indicating strong financial health despite previous losses.

• Insights from our recent growth report point to a promising forecast for Franchise Brands' business outlook.

• Dive into the specifics of Franchise Brands here with our thorough financial health report.

Keywords Studios

Overview: Keywords Studios plc, with a market cap of ￡1.95 billion, offers creative and technical services to the global video game industry.

Operations: Keywords Studios plc generates revenue from three main segments: Create (€365.56 million), Engage (€180.43 million), and Globalize (€261.61 million).

Estimated Discount To Fair Value: 20.1%

Keywords Studios (￡24.28) is trading at a 20% discount to its estimated fair value of ￡30.39, reflecting significant undervaluation based on discounted cash flows. Despite reporting a net loss of €30.88 million for the half year ended June 2024, the company is forecast to become profitable within three years with earnings expected to grow by 59.13% annually. The recent acquisition agreement by Bidco values Keywords Studios at approximately ￡2 billion, further underscoring its potential value.