Are these the best cheap shares to watch in 2026?

The FTSE 350’s solid year has seen it gain 16%, a very creditable performance, especially when April’s volatility is taken into account. 

Despite this gain for the index, there are still some bargains to be had within the index, based on the current price-earnings ratio versus the five-year average. The list below looks at those companies trading at a discount to the longer-term valuation which have also seen positive share price performance over the last thirty days.

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Best cheap shares to watch

These stocks have been selected based on the discount of the current P/E ratio to the five-year PE ratio. Always do your own research. Past performance is not a guide to future performance.

1. Foresight Group
2. Prudential
3. Marshalls
4. London Stock Exchange
5. Severn Trent

Foresight Group Holdings

Foresight trades at a steep 77.7% discount to its five-year valuation, reflecting investor caution toward listed alternatives and pressure on fundraising across private markets. The recent 4.6% share gain hints at stabilising sentiment as lower-rate expectations revive interest in long-duration infrastructure assets. Foresight’s model of contracted, predictable revenues could look more attractive if discount rates fall, but the market still wants clearer evidence that fundraising pipelines and earnings visibility remain resilient. The key question is whether the valuation now overshoots the risks or whether the sector faces a more prolonged structural reset.

Prudential

Prudential’s 65.5% valuation discount reflects concerns over China-related insurance demand, uneven Asian macro conditions and slower new-business trends. Yet the stock is up 10.3% over the past month as sentiment toward the region improves and investors weigh the possibility of stabilising consumer conditions. The long-term structural case of rising wealth and insurance penetration remains intact, but markets want firmer evidence of recovering sales, persistency and capital generation. The rally may continue if macro headwinds ease, but sustained re-rating depends on clearer operational momentum and proof that the current discount overstates near-term pressures.

Marshalls

Marshalls sits 58.2% below its five-year valuation, reflecting the downturn in UK construction, weak housing activity and margin pressure from cost inflation. A strong 11% rise over the past month suggests investors are positioning for a cyclical recovery as rate expectations move lower. Marshalls has tightened costs and streamlined operations, giving it leverage when volumes recover, but demand remains soft in the near term. To sustain a re-rating, markets will need signs of stabilising orders and early recovery in residential activity. For now, the valuation still prices in a cautious outlook despite tentative improvement in sentiment.

London Stock Exchange Group

London Stock Exchange Group (LSEG) trades 48.9% below its five-year valuation, unusually wide for a business built on recurring data and infrastructure revenues. The 4.4% monthly rise suggests confidence is slowly improving as integration costs fade and subscription demand remains steady. The market remains focused on execution after the Refinitiv deal, including synergy delivery and margin expansion, while competitive pressure in data services also weighs on sentiment. Still, the scale of the discount appears heavy for a business with strong client lock-in and diversified revenue streams. Clearer evidence of consistent growth in data and analytics would support a firmer re-rating.

Severn Trent

Severn Trent’s 47.5% discount reflects regulatory scrutiny, heavy investment requirements and financing concerns across UK water utilities. The 3.1% monthly rise has been supported by steadier gilt markets and expectations of lower rates, which ease pressure on leveraged regulated companies. Investors remain cautious about funding needs, dividend sustainability and the impact of the next regulatory settlement. However, the business retains defensive characteristics through inflation-linked revenues and long-duration assets. A clearer regulatory and financing outlook will be needed for a stronger re-rating, but the current discount may already reflect a very cautious stance on sector risk.

How to invest or trade in cheap shares with us

1. Learn more about cheap shares
2. Choose whether to trade or invest
3. Open an account with us or practise on a demo
4. Select your opportunity
5. Choose your position size and manage your risk
6. Place your deal and monitor your trade

When you invest in cheap shares, you hold them over several years with the view of building wealth over time.

Trading takes more of a short—term approach and takes advantage of small market movements. When you trade you can also benefit from leverage.

Leverage provides you with greater exposure to financial markets than your initial deposit would otherwise allow as market movements are magnified. For example, with 5:1 leverage, you could open a £5,000 position while only depositing £1,000 as ‘margin’. A 10% market movement could result in a 50% gain or loss on your deposited margin.

Keep in mind, leverage means you can gain or lose money faster than expected. Because your position size is far greater than your deposit, you could lose more money than you put in. Be aware also that past performance is not an indicator of future returns.

Best cheap shares to watch summed up

Given the current economic climate, with the UK economy entering into a phase where interest rate cuts are more likely, the above stocks have been identified as having growth potential.²

These companies are just a small selection of top cheap stocks to buy in 2025. Remember that any company can also fail and always do your own research.

Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider. * Learn more about trading or investing in shares with us, or open an account to get started today.

*Based on revenue excluding FX (published financial statements, October 2021).

Footnotes:

¹ IMF, 2025

² Please note growth is never guaranteed. There’s always the risk it could drop in value and you could lose money.