Today I’m looking at the investment case of three FTSE surgers.
Insurer bounces back
Shares in life insurance giant Old Mutual (LSE: OML) have endured a turbulent time of late as a crumbling South African rand has cast concerns over the company’s revenue outlook. Indeed, the company dropped to three-and-a-half year lows earlier this month as the African currency sank to record troughs versus the US dollar.
But bargain hunters have piled back in during recent days thanks to Old Mutual’s still-strong growth prospects, sending the stock price 10% higher between last Monday and Friday. And this represents good business, in my opinion. Old Mutual has a terrific footprint not just in South Africa but across the entire continent, making it a major player in a territory where insurance product penetration remains low.
The City expects Old Mutual to follow expected earnings growth of 10% in 2015 with a 4% rise in 2016, resulting in a dirt-cheap P/E rating of 9.7 times for next year. And I believe a prospective dividend of 9.9p per share for 2016, yielding a delicious 5%, seals the deal.
Medical play shoots skywards
Prosthetic joint builder Smith & Nephew (LSE: SN) has also enjoyed a splendid bump higher during the past week, the stock having added 9% between Monday and Friday. And I believe the London business can continue pulling away from its recent 12-month lows as growth investors pile in.
Smith & Nephew received a shot in the arm last week thanks to rumours that Stryker was poised to launch a £12.1bn takeover attempt. The US-based medical firm is flush with cash and has apparently appointed Goldman Sachs to advise on a potential deal.
And I believe Smith & Nephew is certainly worth the fuss. Demand for the company’s synthetic body parts continues to explode, particularly in the white-hot North American market. Meanwhile acquisitions in developed and emerging regions alike should significantly bolster sales in the years ahead.
Smith & Nephew is expected to recover from an anticipated 4% earnings fall in 2015 with a 10% rise next year, resulting in a P/E rating of 19.1 times. I believe the firm’s improving position in a rapidly-expanding market fully warrants such a rating.
Manufacturer on the march
Household goods leviathan Unilever (LSE: ULVR) has also performed well during the past week, its share price ascending 3% between last Monday and Friday.
And with good reason, in my opinion – the London firm has exceptional exposure to emerging markets across the globe, allowing it to reap the rewards of galloping consumer spending power in these territories.
On top of this, Unilever boasts a star-studded portfolio of products that can be found across the home, from Ben & Jerry’s ice cream through to Dove soap. Such labels carry unrivalled pricing power that keep revenues rising regardless of wider economic troubles. And the business has invested huge sums in marketing and developing these brands to maintain shopper interest.
Consequently the City expects Unilever to follow a predicted 11% earnings rise in 2015 with a 7% advance in 2016, producing a P/E rating of 20.1 times. This represents great value given the firm’s excellent growth prospects.
