Is SABMiller plc A Super Growth Stock?

Does SABMiller plc (LON: SAB) have the right credentials to be classed as a very attractive growth play?

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.

Shares in SABMiller (LSE: SAB) (NASDAQOTH: SBMRY.US) have experienced a very disappointing year, being down 13% while the FTSE 100 is up over 3% at the time of writing. Part of the reason for this has been general weakness surrounding companies with considerable exposure to the developing world, as the sustainability of the emerging market growth story has been called into question during 2014. However, does the share price weakness and question marks over emerging markets mean that SABMiller is no longer a super growth stock?

Strong Growth

SABMiller’s pedigree as a growth stock is clear, with the alcoholic beverage company posting double-digit earnings per share (EPS) gains in each of the last four years. Indeed, even though growth from emerging markets has been less than forecast over the last year, SABMiller is still expected to increase EPS by 2% in the current financial year (to the end of March 2014). This highlights the resilience of SABMiller and the products it sells (mainly beer).

sab.millerFurthermore, growth forecasts for the next two financial years are very impressive, with SABMiller forecast to grow EPS by 9% next year and by 11% the following year. It seems as though the current year, although disappointing, was a blip and not the start of a period of prolonged downbeat earnings.

Good Value?

As with many things in life, you get what you pay for. Indeed, SABMiller’s strong growth record and impressive EPS forecasts don’t come cheap. With shares currently trading on a price to earnings (P/E) ratio of 18.7, they are considerably more expensive than the FTSE 100, which has a P/E of around 13.5. However, the price to earnings growth (PEG) ratio of SABMiller puts the impressive growth prospects and relatively high valuation together, and shows that SABMiller offers growth at a reasonable price. While a PEG ratio of 1.9 is some way above the ‘sweet spot’ of 1.0, it is better than that of the FTSE 100, which is above 2 (and therefore less attractive).

Looking Ahead

So, while SABMiller isn’t particularly cheap, it is undoubtedly a super growth stock. This is highlighted not only by its strong EPS growth forecasts over the next two years, but also by its relatively large exposure to emerging markets. They may have disappointed slightly of late but still look set to deliver growth that companies such as SABMiller are unable to find elsewhere. As a result, SABMiller looks all-set to deliver impressive levels of future growth and could have a strong 2014.

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.

Peter does not own shares in SABMiller. 

More on Investing Articles

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »

Investing Articles

Down 47% in 5 years, is the IAG share price due a bounce?

Many companies in the travel sector have seen fierce rallies since 2020. But with the IAG share price still down…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer's has been falling. Despite this, she’s…

Read more »

Investing Articles

AI stocks vs EV shares; which is the best sector for me to invest in?

Jon Smith considers the recent rally in AI stocks and weighs up whether to allocate more money there versus EV…

Read more »

A graph made of neon tubes in a room
Investing Articles

Do Greggs shares have even more growth ahead?

Greggs shares have seen some solid growth in the last few months, as the economy shows positive signs. But is…

Read more »

Investing For Beginners

How I’d aim to grow my Stocks & Shares ISA from £20k to £1m

Jon Smith explains how diversification and focusing on sectors for the future can help grow his Stocks and Shares ISA.

Read more »