Why I Would Buy Big Yellow Group plc, Finsbury Food Group plc And AstraZeneca plc

Royston Wild lays out the investment case for Big Yellow Group plc (LON: BYG), Finsbury Food Group plc (LON: FIF) and AstraZeneca plc (LON: AZN).

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Today I am looking at three Thursday headline makers that stock pickers should seriously consider.

Big Yellow Group

Storage house Big Yellow Group (LSE: BYG) greeted the market with yet another positive update in Thursday business, in turn pushing shares in the business 1.7% higher on the day. The Bagshot business saw like-for-like revenues leap 10% during April-June, to £20.7m, and its underlying occupancy rate jumped to 76.3% from 71.2% during the corresponding 2014 period.

And Big Yellow said that it expects this occupancy rate to leap another three to four percentage points during the current year, a projection I fully expect the firm to realise as Britons’ hoarding culture — boosted by improving spending power — fuels the need for extra space. This view is shared by the City, and earnings growth of 12% and 13% are pencilled in for the years concluding March 2016 and 2017 correspondingly.

Although Big Yellow sports slightly-elevated P/E ratios of 21.5 times and 19.2 times for these years, I expect these to continue collapsing in line with strong demand. And in my opinion projected dividends of 24.5p per share for 2016 and 27.6p for 2017 more than offsets these multiples, creating chunky yields of 3.8% and 4.2%.

Finsbury Food Group

Like Big Yellow, Finsbury Food Group (LSE: FIF) also cheered investors with a bubbly trading update during today’s session and was consequently dealing 6.3% higher. The stock has gained 54% since the turn of the year, propelling the business to current record highs of 92.5p per share at the current time. But I reckon further hefty gains can be expected.

Finsbury Foods announced that total sales jumped 45.8% during the 12 months concluding June 2015, helped by the recent acquisition of Fletchers. Consequently the specialty baker said it expects to exceed current profit expectations. So current City forecasts of a 10% earnings decline for the year could be set for a significant upgrade given today’s release, while predictions of a 27% increase in the current period could also receive a shot in the arm.

I believe that Finsbury Foods offers brilliant value for money, the caterer boasting an ultra-cheap earnings multiple of 9.8 for 2016 — any reading below 10 times is widely considered too good to pass on. When you factor in a projected dividend of 2.8p per share, too, producing a meaty 3.4% yield, I believe the food manufacturer is a hugely appetising stock pick.


Unlike its FTSE compatriots, however, AstraZeneca (LSE: AZN) was recently dealing 0.4% lower in Thursday’s session and this extends the broad downtrend seen during the past few months. However, I believe this current weakness — AstraZeneca has shed 11% since the middle of April — makes the business a bargain at the current time, even though the problem of exclusivity losses looks set to continue.

The number crunchers expect the London firm to arrest the heavy earnings declines of recent years in 2015 with a bottom-line stagnation, although a fresh 3% fall is predicted for 2016. But I am convinced AstraZeneca’s reinvigorated R&D pipeline — combined with surging healthcare demand from emerging regions — makes the business a terrific long-term growth pick. The business received FDA approval for its Iressa lung cancer drug just this week, and AstraZeneca plans to release a further six oncology-related products during the next five years alone.

I consider a prospective P/E multiple of 15.5 times decent value given these hot product prospects, while juicy dividend projections around 285 US cents for 2015 and 2016 cement the investment case in my opinion — these forecasts create a produce market-beating yield of 4.3%.

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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