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These FTSE 100 stocks look dirt-cheap on paper. But to my mind, the potential risks they pose to investors far outweigh the possible rewards.
Here’s why.
Defying gravity
After experiencing some spring turbulence, the International Consolidated Airlines (LSE:IAG) has risen sharply again over the summer. At 390.8p per share, the FTSE company has now gained 29% in value since the start of 2025.
I’m left scratching my head at this rebound given a string of disappointing recent updates from the airline industry. Jet2 was the latest major flyer to sound the alarm on Thursday (4 September) when it slashed profits forecasts, warned of a “less certain consumer environment“, and cut the number of seats on sale for the winter season.
This reflects tough conditions in Europe, and is a bad omen for International Consolidated Airlines, whose continental exposure is significant. That being said, the British Airways owner also has substantial global reach to help it navigate these local issues.
The problem is that the outlook for its money-spinning transatlantic routes is also coming under pressure. Tourism to the US is declining, and particularly from Europe, as travellers respond to the changing political landscape and changes to immigration rules. Fresh economic data Stateside suggests growing stress there, too, with signs of a slowdown casting doubts on future ticket sales.
City analysts expect the airline group’s earnings to soar 21% in 2025. This, in turn, leaves it trading on a price-to-earnings (P/E) ratio of 6.7 times.
That’s a pretty attractive valuation on paper. However, it’s a ratio I feel reflects the high level of risk the shares carry today.
Combined with traditional earnings threats like volatile fuel costs, intense competition, and flight disruptions due to strikes by airport and air traffic control personnel, I’m afraid the shares carry far too much danger for my liking. Not even the possibility of long-term travel growth (and especially in fast-growing emerging markets) is enough to make me part with my cash.
Another FTSE 100 flyer
Imperial Brands (LSE:IMB) is another large-cap UK share tipped for solid growth over the near term. City analysts expect a 4% earnings rise this financial year (to September 2025) to accelerate to 10% during the upcoming financial year.
Such forecasts also mean the cigarette maker offers decent value at face value. Its P/E ratio for financial 2026 is an undemanding 9.1 times.
But like IAG shares, I believe this valuation reflects Imperial Brands’ uncertain profits outlook. More specifically, it faces an unrelenting sales slowdown as consumers — encouraged by stricter rules on the sale, advertising, and marketing of cigarettes, vapourisers, and other nicotone delivery vehicles — increasingly turn away from them on health grounds.
Imperial Brands sells its products across the globe, including to markets in Asia and Africa, where smoking remains prevalent. It also enjoys terrific brand power through cartons like JPS and West, which can help it to outperform the broader market.
However, the business also faces significant declines in its core markets of the US, Europe, and Australia. Weaknesses here pulled group volumes 3.2% lower between October and March, latest financials showed.
Imperial Brands shares have risen 20% in 2025, to £31.16. But I fear it could be just a matter of time before the tobacco titan resumes its long-term downtrend.
