Shares in BT (LSE: BT-A) (NYSE: BT.US) have made a strong start to the year, with them having risen by 13% and outperformed the FTSE 100’s gain of 8%. And, while BT trades on a price to earnings (P/E) ratio of 14.7 (versus over 16 for the wider index), its share price could come under pressure in the short run. That’s because it offers fairly mediocre earnings growth prospects over the next couple of years, with its bottom line set to grow by just 4% this year, and 6% next year. As such, BT has a price to earnings…
Shares in BT (LSE: BT-A) (NYSE: BT.US) have made a strong start to the year, with them having risen by 13% and outperformed the FTSE 100‘s gain of 8%. And, while BT trades on a price to earnings (P/E) ratio of 14.7 (versus over 16 for the wider index), its share price could come under pressure in the short run. That’s because it offers fairly mediocre earnings growth prospects over the next couple of years, with its bottom line set to grow by just 4% this year, and 6% next year. As such, BT has a price to earnings growth (PEG) ratio of 2.1, which appears to be rather high.
Of course, BT’s long-term potential remains appealing, with its move into pay-tv and mobile set to transform its earnings growth profile. However, it may be worth waiting for either a more attractive share price, or an improved outlook, before buying a slice of BT.
Today’s update from LGO (LSE: LGO) provides its investors with yet more encouraging news flow regarding its long-term potential, with the first of seven planned wells at its key Goudron field in Trinidad having been successfully spud. Drilling will now continue on the other six wells, with LGO expecting the programme to yield similar results to the successful eight wells that were drilled last year.
Looking ahead, the field is set to provide the company with an excellent earnings stream, with it being very lucrative even when oil prices are at their current low levels. And, while news flow regarding the remainder of the company’s drilling programme has the potential to disappoint, the long term future for the company looks to be upbeat. As such, now seems to be a good time to buy a slice of it.
Investors in M&S (LSE: MKS) have enjoyed a great start to 2015, with the food and clothing retailer seeing its share price rise by 19%. And, looking ahead, there could be further gains to come, since M&S is set to benefit from an economic tailwind from an improving UK economy. This could cause shoppers to move away from discount stores and return to their former favourites (such as M&S), as wage rises outstrip inflation (or deflation, as was the case with March’s figure).
Clearly, M&S offers less appealing value than a few months ago, but it still trades on a P/E ratio of 16.1, which for such a high quality company seems to be a price worth paying.
Legal & General
With the General Election looming, it would be of little surprise for investors to seek out relatively consistent and less volatile stocks. After all, there is a very real chance of a second election later in the year, which will inevitably create a degree of uncertainty. This could be good news for investors in Legal & General (LSE: LGEN), since the insurance company has a beta of just 0.8, which means that its shares should move by just 0.8% for every 1% change in the wider index.
And, with Legal & General having delivered growth in its bottom line in each of the last three years, it offers a greater level of consistency than many of its sector peers. Furthermore, with a P/E ratio of 14.9, it continues to offer good value for money, too.
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Peter Stephens owns shares of Marks & Spencer Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.