Today I’ll be taking a closer look at supermarket giant Tesco (LSE: TSCO), multinational insurance firm Aviva (LSE: AV) and commercial TV network ITV (LSE: ITV). Should you be risking your savings on any of these shares?
Basket case
Tesco last week announced its results for the year ending 27 February. The grocer and general retailer reported a £162m pre-tax profit, which was in stark contrast to the previous year when it posted a record-breaking £6.3bn loss. Management however remained cautious, describing the market as challenging, deflationary and uncertain.
Now that the dust has settled, following a week of both bullish and bearish commentary, it’s decision time. Is Tesco a worthy investment? Well, the earnings outlook is certainly optimistic, with analysts expecting 177% earnings growth this year, followed by a further 35% increase next year. That leaves the shares on forward earnings multiples of 24 and 18 for the next two years.
For me, the shares have yet to reach bargain territory, and investors should wait until next year before putting Tesco in their shopping baskets.
Worth the risk?
Insurance giant Aviva has seen its share price fall by 10% in the last month despite reporting an encouraging set of full-year results for 2015. The group’s operating profits were up 20% to £2.7bn, which was ahead of expectations, and this in turn gave management the confidence to raise its full-year dividend by 15%.
The City is certainly optimistic about the future, with analysts talking about a big leap in earnings from 20.6p per share to 46.47p in 2016, with 50.83p pencilled-in for next year. If those estimates come to fruition then the shares will be trading on around 9 times forecast earnings for this year and next. In my book, that represents excellent value, and the shares are worth a look on those projections alone.
However, that’s not the end of the story, as there are decent dividends on offer too. The company is expected to pay out 23.71p per share for this year, rising to 26.83p next year, giving prospective yields of 5.4% and 6.1%, respectively. So solid income and decent capital growth potential. What’s not to like?
Switch over to ITV
It seems like 2015 was also a good year for ITV. The media giant saw its pre-tax profits rise to £641m, from £605m the previous year, on revenues of almost £3bn. In addition, the company announced a 10p per share special dividend to be paid alongside the final dividend of 4.1p per share. You can get your hands on both if you snap up the shares before the 28 April ex-dividend date. The payout is due on 27 May.
So 2015 was a vintage year, but what about the future? Brokers have estimated earnings growth of 9% and 7% for the next couple of years, coupled with prospective dividend yields above 3%. The valuation also looks promising with the shares trading on 13 times forecast earnings for this year, falling to 12 for 2017, which to me represents decent value. Investors seeking capital growth might want to switch over to ITV.
