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2 FTSE 100 stars you should consider buying before it’s too late

Photo: Ian Wilson. Cropped & adjusted. Licence: https://creativecommons.org/licenses/by/2.0/

To say that 2016 has proved to be a horror show for the ITV  (LSE: ITV) share price would be putting it a little lightly.

The broadcasting giant has seen the value of its stock erode 36% since the year kicked off, the company even taking in three-year troughs in the days following June’s shock EU referendum result.

The evaporation in investor appetite can be considered wholly justified on one hand, reflecting a marked slowdown in advertising revenues at the company. Just this month ITV advised that ad sales fell 4% during the July to September quarter. Has trade improved since? No chance. The business also advised that “in recent weeks the political and economic uncertainty has increased and we are currently seeing more cautious behaviour by advertisers.”

And the TV firm suggested that there’s worse to come as Brexit dominates commercial decisions — as a result, ITV has pencilled-in a 7% earnings dip for the fourth quarter.

Of course waning advertiser revenues are a big problem for the broadcaster, but stock pickers shouldn’t overlook the robust performance of the rest of the business. ITV announced that revenues from its ITV Studios production arm soared 18% during Q3, to £923m, reflecting the media firm’s ambitious global expansion drive.

On top of this, ITV’s Online, Pay & Interactive division enjoyed a 22% revenues uptick during the last quarter, demonstrating the company’s know-how across media platforms.

So although ITV’s brilliant record of earnings generation is expected to come to a halt in 2016 — a 1% drop is anticipated by City analysts — I reckon a consequent P/E rating of 10.1 times is a supreme level at which to latch onto the firm’s stunning long-term growth prospects.

Meanwhile, a 4.4% dividend yield also suggests ITV is currently undervalued by the market.

The right medicine

There’s also an argument that recent heavy selling at GlaxoSmithKline (LSE: GSK) is somewhat unjustified given the pharma ace’s rapidly-improving sales outlook.

After reaching record peaks above £17.20 per share in October, GlaxoSmithKline has seen investor demand cool sharply during the last six weeks and the firm was most recently dealing at a hefty 12% discount to last month’s heights.

However, I’m convinced GlaxoSmithKline’s next charge higher is a matter of ‘when’ rather than ‘if’. Why? An anticipated 31% earnings rise in 2016 should herald an end to the value-crushing patent problems of yesteryear.

Indeed, the pills play’s rejuvenated product pipeline looks set to supercharge group revenues in the years ahead, particularly as GlaxoSmithKline pours huge investment into fast-growing areas like HIV and vaccines.

And the Brentford-based business certainly offers excellent value for money given its blockbuster investment potential. GlaxoSmithKline boasts a forward P/E ratio of 15.1 times, in line with the wider FTSE 100 average. But a 5.3% dividend yield takes the scythe to most of the Footsie competition.

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