Today I am looking at two FTSE giants offering splendid bang for one’s buck.
The prescription for plump returns
With drugs giant GlaxoSmithKline (LSE: GSK) throwing the kitchen sink at developing its next generation of revenues drivers, I believe the business is in great shape to deliver stunning returns in the years ahead.
The Brentford company has a splendid track record of getting product from lab bench to pharmacy shelf and, with GlaxoSmithKline planning to submit 20 new products for approval by 2020, I reckon the firm is in great shape to hurdle its current patent-related troubles.
Indeed, after notching up a predicted 20% earnings decline in 2015 — the fourth on the bounce, if realised — the City expects GlaxoSmithKline’s turnaround plan to start really kicking into gear from next year onwards. An 11% bottom-line ascent is currently forecast for 2016, resulting in a decent P/E multiple of 16.3 times.
A reading around or below 15 times is generally considered very attractive value, and given the huge potential of GlaxoSmithKline’s rejuvenated product pipeline — not to mention galloping healthcare investment in established and emerging geographies alike — I believe this represents a great level to get in on the pharma play.
On top of this, GlaxoSmithKline’s stellar earnings outlook has prompted the business to propose an 80p per share dividend through to the close of 2017, resulting in a market-busting yield of 5.9%. By comparison the FTSE 100 average yield stands closer to 3.5%.
Services play set to surge?
Similarly, I reckon corporate services provider Hogg Robinson (LSE: HRG) is a solid choice for those seeking great growth and income prospects at a terrific price.
The Basingstoke firm — which provides travel, expense and data management solutions across the globe — advised on Wednesday that underlying pre-tax profit galloped 15% higher during April-September, to £13m, even though revenues slipped 4% during the period to £155.9m.
Hogg Robinson noted that the top-line slippage was caused by “expected migration from classic to online booking and strong competitor pricing,” although the company noted that its core UK market continues to grow while business is also picking up in Europe. On top of this, demand for the firm’s cutting-edge Fraedom technology continues to take off, and sales at this division leapt 10% in the first half.
With restructuring also clicking through the gears — operating profit margins rose to 12.3% from 10.8% a year earlier — the number crunchers expect Hogg Robinson to enjoy 8% earnings upticks in the periods ending March 2016 and 2017 respectively, figures that leave the services provider dealing on ultra-low P/E ratings of 9.5 times and 8.8 times for these years. Any sub-10 reading is widely considered a steal.
And when you factor in projected dividends of 2.5p and 2.7p per share for 2016 and 2017 respectively — creating hefty yields of 3.7% and 4% — I believe Hogg Robinson is a compelling value pick.
