FTSE 100 stocks have pushed upwards in recent months. This has been engendered by an improving macroeconomic forecast and positive commentary around Rishi Sunak’s premiership. Not to labour the point, but the quiet pragmatism of Sunak has done wonders for my confidence in UK stocks.

Today I’m looking at two FTSE 100 stocks that are still trading at significantly below where they were one, two or three years ago.

Hargreaves Lansdown (LSE:HL) is the leading investment platform provider in the UK. It also offers financial services to its clients.

The stock had been on a fairly steady upward trend in the years leading up to the pandemic. However, Covid-19 lockdowns sent investor activity into overdrive and the Bristol-based firm’s share price surged, reaching above 2,200p.

But pandemic-era growth proved unsustainable as the economy reopened and people went back to work. The stock, like other growth and tech stocks, had become very expensive. The firm now trades for less than 850p, and with a price-to-earnings around 15.

However, for me, the stock is now woefully undervalued. Even during a cost-of-living crisis, the firm is posting positive results. Net new business fell by 30% to £1.6bn, but we’re in the middle of a depression. Higher interest rates helped revenue grow 20% and the company increased active clients by 31,000 in the half year just gone. 

In the near term, I’m expecting more interest rate tailwinds. But in the long run, Hargreaves will continue to attract customers as Britons increasingly look to manage their own portfolios.

Rolls-Royce (LSE:RR) has surged in recent months, but it’s still massively down on its pre-pandemic highs.

The company, for which more than a third of revenue comes from large engine flying hours, suffered during the pandemic. It sold off business units and went through an efficiency drive to pay off debts and reduce overheads.

But Rolls surprised investors last month with better than expected results. It posted a statutory operating profit of £837m in 2022, considerably up on £513m a year earlier. Revenue grew to £13.5bn from £11.2bn. Rolls said it expected underlying earnings of £800m-£1bn this fiscal year.

Yes, there is still a long way to go in the Rolls recovery. However, it’s now back in back in the black and debt should start to fall to manageable levels if civil aviation continues its recovery. “In 2023, we assume large engine flying hours at 80-90% of 2019’s level and 1,200-1,300 total shop visits”, the company said in its report.

The business has also seen strong growth in its other two major business segments. Order growth in the power systems segment was up 29% to £4.3bn. Defence is progressing well, the business says.

The metrics are starting to add up too, the company has a price-to-sales ratio below one and future earnings potential is attractive at the current share price.

I’m continuing to buy Rolls-Royce stock as I think the firm has recovered more than the share price indicates. The stock down 50% over five years.

The post Investors should buy these FTSE 100 stocks before they surge! appeared first on The Motley Fool UK.

setButtonColorDefaults("#5FA85D", 'background', '#5FA85D'); setButtonColorDefaults("#43A24A", 'border-color', '#43A24A'); setButtonColorDefaults("#FFFFFF", 'color', '#FFFFFF'); })()

More reading

• Rolls-Royce shares spike, but here are some red flags I’ve spotted
• My Rolls-Royce shares are up 75% in 4 months. Should I sell, hold, or buy more?
• If I’d invested £5,000 in Rolls-Royce shares a week ago, here’s how much I’d have now!
• Rolls-Royce shares soar 40%! Can the rally continue?
• Best British shares to buy in March

James Fox has positions in Hargreaves Lansdown Plc and Rolls-Royce Plc. The Motley Fool UK has recommended Hargreaves Lansdown Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.