Seeking Value In Afren Plc, J Sainsbury plc, Petrofac Limited, BP plc And Tate & Lyle PLC

Afren Plc (LON:AFR), J Sainsbury plc (LON: SBRY), Petrofac Limited (LON: PFC), BP plc (LON: BP) and Tate & Lyle PLC (LON: TATE) offer value.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With the FTSE 100 still hovering around all-time highs, it’s getting hard to find any shares out there that trade at an attractive valuation. However, I believe I have found five gems: Afren (LSE: AFR), Sainsbury (LSE: SBRY), Petrofac (LSE: PFC), BP (LSE: BP) and Tate & Lyle (LSE: TATE), all of which currently look undervalued. 

Trouble in the Eastoil

Afren has been hit with a wall of bad news this year. With battles raging near some of the company’s key oil prospects within Iraq, it was revealed that Afren’s CEO had been suspended as he had made some unauthorized payments. 

Nevertheless, despite worries the company’s underlying business appears to be functioning well, although oil production is expected to fall slightly this year. The City expects the company to report earnings per share of 12.2p this year, putting the company on a forward P/E of 8.8. Current expectations are for earnings to grow 8% during 2015, which puts the company on a 2015 P/E of 8.1.

Sainsbury'sRise of the discounters

Sainsbury’s has been a victim of general negativity towards the UK retail sector this year. Indeed, while the company’s peers have grappled with falling sales, Sainsbury’s sales have remained robust, which makes the company a compelling investment at current levels.

Right now Sainsbury’s is trading at an undemanding forward P/E of 10.3 and the company supports a current dividend yield of 5.3%. That said, City analysts don’t expect the company’s earnings to do much over the next few years, a slight fall of around 10% is expected. Still, as a income investment Sainsbury’s is a great pick. 

Cheaper than peers

Petrofac, as one of the world’s leading oil service companies is in demand. Within its last set of results the company reported an order backlog of more than $20bn, locking in several years of revenue. Further, the company has one of the best reputations for project delivery in the industry. Profit margins are also some of the best around. 

That said, the company has warned on profits several times during the past year, as some projects took longer than expected to complete. However, an undemanding valuation of only ten times historic earnings makes Petrofac a cheap bet. The company’s shares support a dividend yield of 3.5%.

Sweet treatSugar

Tate & Lyle is one of the world’s leading sugar and sweetener businesses. The company has a solid grip on the market thanks to its SPLENDA Sucralose brand. 

Tate has fallen out of favour with investors recently due to the fact that first-quarter profits came in below expectations. Management blamed these lower-than-expected results on a strong pound and the unexpected shutdown of its SPLENDA Sucralose facility in Singapore, as well as customer order patterns. 

For long-term investors this could be a great chance to buy in. At present levels the company is trading at a forward P/E of 13.8, which is expected to fall to 13 during 2016. This is not a demanding valuation for a world leading sweetener company. Oh and I can’t forget Tate’s attractive 4.1% dividend yield, covered twice by earnings per share. 

Russian troublesbp

BP has been sold off due to concerns about the company’s exposure to Russia. In particular, the company owns nearly a quarter of Russian oil giant Rosneft, there have been concerns that the Russian state could nationalize this stake. 

Still, like Afren, BP’s underlying business remains intact and the company looks attractively priced at current levels. Indeed, BP’s shares currently trade at a forward P/E of 10.1, falling to 9.4 during 2015. Additionally, the shares support an attractive 4.6% dividend yield. This payout is set to rise to 5.2% within the next two years. 

For long-term investors, BP’s short-term troubles are not overly concerning. What’s more, a year of lacklustre share price performance gives investors a chance to reinvest their dividends at an attractive price, which should turbo-charge returns when BP springs back into life.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns shares of Petrofac. The Motley Fool UK has recommended Afren, Petrofac and Tate & Lyle. The Motley Fool UK owns shares of Petrofac. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »