Today I am looking at three FTSE giants delivering excellent value for money.
Vodafone Group
Shares in telecoms colossus Vodafone (LSE: VOD) has seen its stock value erode 5% during the past three months, and although prices have stepped tentatively higher more recently, I believe the business still offers plenty of bang for one’s buck.
Looking at conventional metrics this view may appear just a tad barmy. For the year to March 2016, a predicted 13% earnings decline — the third on the spin if realised — leaves Vodafone dealing on a P/E rating of 47.9 times, sailing well above the benchmark of 15 times that represents decent value. And even though earnings are predicted to bounce 19% higher in 2017, this still leaves the communications specialist dealing on a ratio of 41.6 times.
However, I believe Vodafone fully merits this premium thanks to its ever-improving growth prospects. Vast improvements to its 3G, 4G and voice capabilities is helping it to maximise gains from improving European marketplaces. Meanwhile, rising consumer spending power across Africa, the Middle East and Asia is driving demand for Vodafone’s services to the stars.
Besides, Vodafone’s high earnings multiples are also offset by chunky dividend yields this year and beyond. Thanks to its splendid cash flows the business is expected to shell out payments of 11.5p per share in both 2016 and 2017, yielding a smart 5.2%. And I expect dividends to grow once again after this period as the colossal costs of its Project Spring investment programme lapse.
Halfords Group
Bike and auto retailer Halfords (LSE: HFD) has sledded sharply lower since the start of August, and the stock experienced an additional downleg following this month’s half-year update. In total the business has seen its shares lose a third of their value since the sell-off kicked in.
Halfords saw group revenues advance 1.8% during April-September, to £533.5m, although pre-tax profit slumped 6.3% in the period to £46.4m. The poor performance was caused by a disappointing showing at its Cycling arm, and slowing bike sales looking ahead are likely to cause profits to be broadly flat next year from the current period, Halfords advised.
However, the company’s car-related operations continue to perform exceedingly well, and like-for-like Car Maintenance sales galloped 7.1% higher in the first half. And I am backing the board’s belief that profits should accelerate again from next year as its new Moving Up a Gear initiative — which aims to improve customer service online and in-store — clicks through the gears.
Current pressures are expected to push earnings at Halfords 2% lower in the 12 months to March 2016, although this results in an ultra-low P/E rating of 11.8 times. And this value slips to a bargain-basement 11.2 times for the following year thanks to a projected 5% earnings recovery.
In addition, Halfords also boasts market-beating dividend yields for this period — a forecast reward of 17p per share for the current period creates a jumbo 4.4% yield, while a hike to 17.9p next year raises this figure to 4.6%. I believe Halfords is a great selection for those looking to latch onto Britain’s improving retail conditions at a great price.
