Down but not out! 2 unloved FTSE 100 stocks I reckon could help you to retire early

Couple relaxing on a beach in front of a sunset
Couple relaxing on a beach in front of a sunset

If you’re one of those people that like to squeeze every drop of value out of your purchases, then I think now is a perfect opportunity to grab your chequebook and go out stock shopping.

There’s a plethora of undervalued stocks in the FTSE 100 alone as of today, a theme which I have studied in no little detail since October’s sell-off kicked in. A couple of sinkers that I haven’t discussed recently are Smith & Nephew(LSE: SN) and RELX (LSE: REL), however, and I’d like to take the opportunity to explain why I feel dip buyers need to pay them close attention right now.

Medical marvel

Artificial limb and joint manufacturer Smith & Nephew has been host to some significant share price volatility over the past year because of challenging trading conditions in the US. The Footsie firm has steadied in recent sessions following the more recent sell-off but it still remains around 8% lower than levels seen at the start of October.

This leaves the medical mammoth changing hands on a forward P/E ratio of 18.1 times, a big discount to its historical earnings multiples. And this represents a great opportunity for investors to grab a slice of the action, even though I’m not expecting a blowout set of numbers when third-quarter figures are released tomorrow (Thursday, November 1).

You see, while the revenues slowdown in its established territories is causing City analysts to predict a 3% earnings slide in 2018, like the number crunchers, I believe it has the tools to bounce back from next year and deliver solid profits growth.

Europe’s largest medical device maker may be struggling in developed markets right now, but the rate at which sales are growing in emerging markets (by double-digit-percentages in China during the first half of 2018, for example) signals a bright future for Smith & Nephew and its top line.

Make no mistake: global healthcare investment is still on course to boom thanks to the pounding wealth growth being printed in developing regions. And through its best-in-class products like the POLAR3 hip replacement product, I think Smith & Nephew is in great shape to ride this trend.

Another underbought beauty

RELX is another share that took a smack in October, although the 5% drop it has endured this month makes it one of the FTSE 100’s lesser-hit companies.

I can’t help but think that the market is still failing to give the information and analytics specialist the credit that it deserves, however, and particularly following its bright financial update of last week. It advised that underlying revenues had risen 4% in the first nine months of 2018.

RELX’s key markets remain strong and the business is engaged on an ambitious M&A drive to keep profits on an upward slant, clocking up another seven acquisitions at a total cost of £943m in the year to September.

City brokers are predicting earnings growth of 4% in 2018 alone, and this results in a forward P/E ratio of 18.4 times. Not exactly cheap on paper, but in my opinion, this reading makes RELX a snip when you consider its robust position in numerous sectors like science and law, not to mention its wide and ever-growing geographical base.

Want To Boost Your Savings?

Do you want to retire early and give up the rat race to enjoy the rest of your life? Of course you do, and to help you accomplish this goal, the Motley Fool has put together this free report titled "The Foolish Guide To Financial Independence", which is packed full of wealth-creating tips as well as ideas for your money.

The report is entirely free and available for download today, so if you're interested in exiting the rat race and achieving financial independence, click here to download the report. What have you got to lose?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended RELX. 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.