Beware of the cheap valuations at these FTSE 100 stocks

Updated: 
Jolly Roger pirate flag

The threat of trading conditions worsening in Britain and overseas make Kingfisher(LSE: KGF) too dicey for savvy investors, in my opinion.

Digital and product improvements at Screwfix have helped keep the wolves from the door at Kingfisher's UK operations, and helped the retailer book a 5.8% like-for-like sales rise on home shores during August-October.

But the retailer's plan to resuscutate it its ailing French operations continues to fail, and underlying revenues here slumped 3.6% in the period.

City brokers appear pretty unperturbed by these Gallic troubles, however, and expect Kingfisher's huge transformation drive to help earnings grow 3% and 17% in the years to March 2018 and 2019 respectively.

But a backcloth of rising inflation could see Kingfisher's key British growth lever come under pressure in the months ahead, and with it hopes of sustained earnings expansion.

While Kingfisher's forward P/E ratio of 13.3 times falls below the FTSE 100 average of 15 times, I reckon a reading closer to the bargain-basement benchmark of 10 times would be a fairer indication of the firm's high risk profile.

Till travails

The same muddy consumer spending picture also makes me less than optimistic concerning Next(LSE: NXT).

Some would argue that the clothing giant's patchy near-term profits pile is marked in at current levels, however. For the year to January 2018 Next deals on a P/E ratio of 9.4 times, a figure created by an anticipated 7% earnings decline.

But the possibility of earnings pain lasting beyond this period is very real, in my opinion, and the City expects further bottom-line declines to the close of fiscal 2019 at least. And this makes Next a poor selection regardless of its ultra-low multiple, the company battling against rising competition in the mid-tier clothing market as well as souring consumer activity.

Latest Office of National Statistics underlined the steady slide in retail spending, a 0.3% drop in January sales volumes confounding predictions of a 1% rise. And further forecast misses could see Next's already-insipid growth forecasts undergo scary revisions in the months ahead.

Commodity clanger?

The scale of speculative buying in commodities markets, allied with the still-uncertain supply and demand outlook in the raw materials space, also leaves BHP Billiton(LSE: BLT) in danger of a sharp share price retracement in my opinion.

The London firm announced last week that improved raw material prices helped underlying earnings surge 65% during July-December, to $9.9bn.

However, BHP Billiton warned that in the iron ore segment alone -- a segment responsible for 37% of group earnings -- "the market is likely to come under pressure in the short-term from moderating Chinese steel demand growth, high port inventories and incremental low cost supply." And the firm also warned of concerns over the fundamental picture for other key commodities like copper.

Sure, the number crunchers expect earnings at BHP Billiton to blast 472% higher in the year to June 2017. But an anticipated 13% fall the following year reflects the fragile picture for the commodities sector.

I believe the risks continue to outweigh the potential rewards at BHP Billiton despite a conventionally-low earnings multiple of 12.6 times for fiscal 2017.

The perfect growth stock

But while BHP Billiton et al remain on uncertain footing, there are plenty of other stocks just waiting to supercharge your stocks portfolio.

With this in mind, I strongly recommend you check out this special Fool report that identifies what I believe is one of the best growth stocks money can buy.

Our EXCLUSIVE A Top Growth Share report looks at a brilliant FTSE 250 stock that has already delivered stunning shareholder returns, and whose sales are expected to top the magic £1bn marker in the near future.

Click here to enjoy this exclusive wealth report.  It's 100% free and comes with no obligation.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.