Move down in FTSE 100 index and FTSE 250 index This has left investors in a difficult dilemma. Some FTSE shares sold may be undervalued trades. Others can act as value traps, with the potential to fall much further. It can be difficult to differentiate between the two, but here are some stocks on my watchlist.

The engines are ready

The first is EasyJet (LSE: EZJ). The budget airline has seen its share price fall 25% over the past year and 29% in the past three months. At first glance, the decline seems alarming. But when I dig a little deeper, it’s like the kind of temporary disruption that long-term investors often learn to ignore.

The main reason was the sharp shift in the macro environment and not any collapse in business. Rising tensions in the Middle East have caused jet fuel prices to rise sharply. This immediately compresses easyJet’s profit margins.

At the same time, investors have become concerned about inflation and interest rates staying high for longer, raising concerns about discretionary spending, such as holidays. Add to that a weaker pound (which inflates dollar-denominated fuel costs), and you have a perfect storm for the company.

Despite weak stock prices, demand remains strong. Q1 results from the end of January showed summer bookings to be strong. In fact, the CEO pointed out “Largest January booking period ever.”

The Holidays section continues to grow rapidly. This suggests a company that continues to benefit from structural demand for low-cost travel across Europe.

From an evaluation perspective, the disconnect is even clearer. The stock currently trades at a price-to-earnings ratio of 5.4, which is exceptionally low for a company with strong growth prospects. If the situation in the Middle East calms down over the next month or so, I think the stock could rise to a fairer valuation.

Transformation giant

Another option is GB Group (London Stock Exchange: GBG). The technology company provides digital identity verification and fraud prevention services, helping businesses confirm the identity of their customers and detect suspicious activity.

The stock has lost 37% over the past year, with 25% of that loss occurring in the past three months. The situation in the Middle East was one factor, with the company also noting that tariff and geopolitical uncertainty would impact growth, especially in the US.

The company is also working to move to a simpler operating model and one global platform. In the results of the first half of last year, early signs of progress appeared. Revenues rose 1.8% compared to the same period last year, with adjusted operating profits up 1.9%. Certainly nothing to shout about, but it certainly stabilizes the ship.

I believe the worst is now behind the company, and the continued changes should see earnings rise meaningfully next year. The short-term move to me looks like a classic case of weak sentiment overwhelming a company that is already making steady operational progress.

Of course, if geopolitics causes more problems this year, it remains a risk for GB Group. But, overall, I think both easyJet and GB Group are oversold and might be worth looking at.