Travis Perkins (LSE: TPK) is the UK’s leading timber and builders merchant, so the company is well placed to benefit from the country’s current home building boom.
However, Travis Perkins has some problems. In particular, some parts of the business seem highly inefficient and this is something management is trying to fix.
Indeed, the company has recently embarked on a sort of self-help plan, to streamline the business and remove inefficiencies. Analysts believe that this programme will help improve cash flow across the group. According to City analysts, Travis Perkins’ business model has plenty of room for improvement.
An improved cash flow should help Travis pay down debt, strengthen its balance sheet and hike the dividend payout. City forecasts predict Travis will hike its dividend payout by 9% per annum for the next two years. The company’s earnings per share are expected to expand at an annual percentage rate in the low teens.
Travis currently trades at a forward P/E of 15.9 and supports a yield of 2.2%.
Growth through acquisitions
Over the past few decades, Glencore (LSE: GLEN) has built itself up to be one of the world’s largest miners and it has done this by buying low and selling high.
The company is famous for its ability to acquire competitors at or near the bottom of the market at a rock-bottom price. And with this being the case, the present market is the perfect hunting ground for Glencore.
It’s been rumoured that Glencore could be weighing up a bid for mining giant Rio Tinto, which would transform Glencore’s operations overnight.
Nevertheless, as of yet no deal has been unveiled but for long-term holders, buying Glencore at present levels could yield impressive results. The company currently trades just above a multi-year low, but according to City figures, next year Glencore’s earnings are set to jump 56%.
On this basis, the company is trading at a forward P/E of 12.2 and is set to support a dividend yield of 5% next year. Of course, if Glencore does go on a buying spree then these figures will be rapidly revised upwards.
Cutting costs
Just like Travis Perkins, Kingfisher (LSE: KGF) plans to unlock value through a restructuring plan.
As it turns out, a strategic review commissioned by Kingfisher’s new CEO found that in certain areas, Kingfisher was grossly inefficient. For example, the Kingfisher group has five main operating companies with 39,000 products across the group. But, only around 7,000 products are sold at each operating company.
Streamlining Kingfisher’s product offering is just one of the strategic initiatives management has planned for the company to help cut costs and boost profits.
Kingfisher currently trades at a forward P/E of 16 and supports a dividend yield of 2.9%. City analysts currently expect the company’s earnings per share to expand by 9% during 2017 and a further 9% during 2018. Based on this projected growth Kingfisher’s shares are worth paying a premium for.
