On The Hunt For Outstanding Value? Check Out Dixons Carphone PLC, Amec Foster Wheeler PLC, Babcock International Group PLC And Meggitt plc

Royston Wild explains why Dixons Carphone PLC (LON: DC), Amec Foster Wheeler PLC (LON: AMFW), Babcock International Group PLC (LON: BAB) and Meggitt plc (LON: MGGT) are all exceptional stock candidates.

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Today I am looking at three FTSE plays that I reckon provide plenty of bang for one’s buck.

Dixons Carphone

I believe that electrical retailer Dixons Carphone (LSE: DC) is a strong pick for those looking to latch onto encouraging shopping conditions in the UK. The company is doubling-down on its core markets to generate growth, and last month sold off its The Phone House Deutschland division as well as a majority stake in the corresponding Dutch franchise. Indeed, gadgets across the firm’s domestic Carphone Warehouse, PC World and Currys outlets continue to fly off the shelves.

As a consequence the City expects Dixons Carphone to follow an exceptional 26% earnings rise during the 12 months to April 2015 with an extra 24% bump in 2016, shunting the P/E multiple to just 15.7 times. A number around or below 15 times is generally considered attractive value, so news that an extra 11% bottom-line increase in 2017 drives the readout to just 14.1 times should be given serious thought.

It is true that Dixons Carphone’s dividend yields are hardly anything to get excited about during this period, however — the business boasts yields of 2.1% and 2.4% for 2015 and 2016 respectively owing to predicted payouts of 9.3p per share and 10.8p. These figures are far from embarrassing, however, and I expect payouts to continue stomping higher in line with profits growth.

Amec Foster Wheeler

At first glance engineering giant Amec Foster Wheeler (LSE: AMFW) may seem an odd recommendation given my über-bearish take on the oil and mining sectors. While the firm’s huge exposure here may continue to create some problems, I believe that the company’s increasing diversification into other engineering growth sectors — assisted by its exceptional cash generation financing further acquisitions — should drive earnings skywards in the long term.

So while the City expects Amec Foster Wheeler to punch a 2% earnings slide in 2015, a solid 6% rebound is anticipated next year. And these projections create excellent P/E ratios of just 10.9 times and 10.4 times for these years — a readout around or below 10 times is widely regarded as unmissably cheap.

And the engineer is predicted to keep dividends rattling along at delectable levels during this period, too. Amec Foster Wheeler is expected to raise the total dividend to 43.5p per share this year, resulting in a 4.9% yield. And this rises to 5.1% for 2016 due to forecasts of a 44.8p reward.

Babcock International Group

Like Amec Foster Wheeler, I reckon that Babcock International (LSE: BAB) is a great choice for those on the lookout for blue-chip engineering plays, even in spite of the company’s huge reliance on the fossil fuel sector. Indeed, the business noted in its most recent trading update that it “has continued to make strong progress,” news which — combined with a steady uptick in its order book — should assuage any nerves concerning worries across the oil market.

This view is shared by the abacus bashers, who expect Babcock International to bounce back from a 4% earnings decline for the year concluding March 2014 with advances of 14% this year and 11% in 2016. These growth projections push the P/E multiple to just 14.1 times for 2015 and 13 times for next year.

Accordingly, Babcock International is predicted to get dividends roaring higher again from this year after an expected cut — to 22p per share — in fiscal 2015 . Indeed, a payment of 24.9p for this year is anticipated to leap to 28.3p in 2016, and I expect dividends to canter still higher in the coming years. Prospective payouts in the meantime create handy yields of 2.3% and 2.6% for 2015 and 2016 correspondingly.

Meggitt

I am convinced that aerospace giant Meggitt (LSE: MGGT) should experience a bubbling order book looking ahead as defence spend from critical Western customers gallops higher, fuelled by improving economic conditions and rising geopolitical uncertainty. On top of this, Meggitt’s hefty footprint across the civil aviation markets should give earnings a shot in the arm as rising passenger numbers and falling oil prices encourages the world’s airlines to splash the cash on new planes.

This view is shared by the number crunchers, and Meggitt is predicted to recover from last year’s rare 14% bottom-line dip with advances of 6% and 8% in 2015 and 2016 respectively. Consequently the Dorset business changes hands on more-than-reasonable earnings multiples of 14.6 times for this year and 13.6 times for 2016.

And this solid earnings outlook, combined with Meggitt’s solid balance sheet, is expected to propel dividends higher in the medium term. A payment of 15p per share this year is predicted to move to 16.2p in 2016, and although these payouts produce average yields of 2.8% and 3.1%, I reckon dividends should march northwards in line with profits looking ahead.

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.

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

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