The Royal Mail (LSE: RMG) share price has fallen sharply in recent weeks. Concerns over rising costs and intense competition in the parcel delivery arena has spooked investors. These are issues I think need to be taken seriously. But I’d argue that the courier still offers what could be unmissable value to FTSE 100 investors like me.
City brokers think earnings at Royal Mail will rise 16% in the current financial year (to March 2022). This creates a forward price-to-earnings growth (PEG) multiple of just 7 times. On top of this, at current prices, the courier offers a tasty 4.8% dividend yield.
As a long-term investor there’s a lot I like about Royal Mail. I’m drawn to the huge investment it’s making to update its parcels operations, a drive I think will pay off handsomely as e-commerce continues to grow strongly.
I’m also a fan of the drive to continue building its overseas operations to boost its growth prospects and create strength through geographic diversity. Last month, its GLS division acquired Rosenau Transport to bolster its foothold in Canada. I’m paying Royal Mail close attention at current prices.
Another FTSE 100 bargain
Smith & Nephew’s (LSE: SN) another FTSE 100 stock I believe provides brilliant value today. In fact, I’d buy it before the healthcare giant releases third-quarter financials on November 4. I think another share-price-boosting update could be coming down the pipe.
Smith & Nephew — which is primarily known for manufacturing artificial limbs and joints — has traded strongly since Covid-19 eased in many regions and elective surgery procedures picked up again. Most recent financials showed revenues rocketed 48.2% in the second quarter, up from 11.5% in quarter one.
City analysts think Smith & Nephew’s earnings will also leap 21% in 2022. This leaves it trading on a forward PEG ratio of just 0.8. This represents excellent value, given that global healthcare spending is poised to rise strongly in the years ahead.
I also think the company’s role in developing surgical robotic technology will pay off handsomely. I’d buy Smith & Nephew despite the threat posed to elective surgery rates by the ongoing pandemic.
6.5% dividend yields!
The Aviva (LSE: AV) share price shot around 8% higher in the second half of October. But from where I’m sitting I believe the insurance colossus still offers tremendous value at recent price levels. City analysts think earnings will rise 6% in 2022. This leaves it trading on a price-to-earnings (P/E) ratio of 8.4 times for 2022. Furthermore, Aviva sports a spectacular 6.5% dividend yield today.
The life insurance market isn’t immune to tough economic conditions and Aviva could suffer if the global recovery runs out of steam. But I think this threat is more than baked into the share price at current levels. Instead, I’d argue that the FTSE 100 firm’s current valuation is based on how strong trading has been in recent months and how well its transformation programme is performing.
Savings and Retirement products enjoyed record inflows between January and June while general insurance sales came in at 10-year highs. In fact, I think now could be a good time to buy Aviva before third-quarter results are released on 11 November.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Smith & Nephew. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.