Due to the potential investment opportunities available within the UK market, I often find it helpful to use a filter to scan all FTSE 100 shares. These filters range from simple price-to-earnings (P/E) ratio scanners to more complex value or growth screeners. This time, I have decided to look for companies recently hitting their one-year low.
When a share hits its lowest price for the year, it could indicate that it is now in bargain territory. Although not all will be of interest, it only takes one. For that reason, I have widened my FTSE 100 filter to scan for any shares that have hit this year-low level in the last two weeks.
Remarkably my filter identified nine companies within the FTSE 100 that are trading at this low level. The economic headwinds of consistently elevated inflation and economic slowdown have contributed to shares falling. Many general indexes are down far below pre-2020 levels, prior to the pandemic. These are certainly not ideal market conditions, but good quality companies can often be hidden in mass sell-offs. When a strong share is trading at a discount, I want to add it to my portfolio.
A promising find
Within this list, one company, Intertek Group (LSE: ITRK), has caught my eye. This is one of the oldest product testing and inspection businesses and has operated for almost 30 years. After a fairly stable few years, the share price has suffered considerably in 2022, down 35%. As a result, it recently hit its year-low at £36.21 a share.
When looking at discounted shares, it’s important to remember that they are likely to be trading at a lower level for a reason. This doesn’t mean they can’t still present exciting investment opportunities. But the potential risks need to be considered when I decide whether to add them to my portfolio.
When looking at Intertek’s underlying fundamentals, I am very impressed. Profit margins are reasonable, cash generation is decent, and earnings efficiency is significant.
Dividend potential
Another tempting factor is the current dividend yield of 2.9%, which is forecast to reach 3.0% next year. This dividend has been paid consistently for the last 20 years, although it hasn’t grown for three years. Fortunately, Intertek also has a dividend cover of 1.8, indicating that this current yield can be comfortably covered by earnings per share (EPS).
High price multiples
The company currently has a price-to-earnings (P/E) ratio of 19.3, making it not quite a value opportunity. This is despite the dramatic fall in share price and could indicate that the company is returning to a more reasonable pricing level. Furthermore, it is forecast to hit 17.4 next year, which is still fairly elevated in the current market.
Nevertheless, this filter has identified a prime investment opportunity, at a discounted level. Therefore, I would add Intertek to my portfolio once I gather the necessary funds.
