The FTSE100 he surpassed 8,000 points in April and hasn’t looked back since. And its rise since 2020 is already making this year’s stock market crash a thing of the past.

However, I think shares in the notable London Footsie still look dirt affordable and I want to tell you why.

Low index valuation

Compared to other leading stock indices, FTSE100 is characterized by a much lower price-to-earnings ratio (P/E).

The numbers given depend on who you ask, but it’s currently around 12, based on projected earnings. This is low compared to the long-term average of around 15.

And that’s also less than half of the United States S&P500 P/E, which is 28. Interestingly, it is slightly above Nasdaqthe index is 26. Considering that the technology stock index includes several top players, it may still be affordable even if it has reached a record high.

The current low valuation of the FTSE 100 may be justified given the high interest rates and bond yields in the UK. This makes other investments look more attractive. But this could certainly be short-lived.

Buyouts and takeovers

If I look at the stock market news on just one day, I see 13 FTSE 100 companies buying back their own shares. Currently, nearly 30 companies do this on different days.

Contains Barclays (LSE: BARC), which returns a vast chunk of cash to shareholders.

When announcing its results for the first quarter, the bank announced “plan to return at least £10 billion of capital to shareholders between 2024 and 2026 through dividends and share buybacks, with continued preference for buybacks“.

This £10 billion is almost a third of Barclays’ market capitalization!

This certainly makes me think that Barclays rates its shares as affordable.

The smell of foreclosures is also in the air and we have almost seen it Anglo-American bought by another miner Occupational Health and Safety Group in May. Anglo’s offer was valued at £34 billion, up from today’s £29 billion, but the board rejected it.

Cheap individual shares

If we believe the FTSE 100 is undervalued, we could buy an index tracker. However, I prefer to pick stocks individually because too many just seem too affordable.

I mentioned Barclays, so I’ll take a closer look at that as an example of why I think the UK’s biggest shares are good value.

The Barclays share price has performed well this year. However, based on forecasts, we still see a P/E ratio of just seven. And by 2026 it will drop much further, to 4.6, if analysts are right.

There’s no real surprise that brokers currently have a pretty mighty buy consensus on Barclays.

The bank is indeed at risk and I believe it will likely see margins decline if interest rates are inevitable. We may therefore see share prices weaken until the UK sets novel long-term rates. I expect some variability at least.

However, I think Barclays is a great example of why I think FTSE 100 shares are affordable.