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4 Big-Cap Beauties Trading At Unmissable Prices: AstraZeneca plc, Old Mutual plc, BAE Systems plc And DS Smith plc

Today I am explaining the investment case for four of London’s blue-chip bargains.

AstraZeneca

While it is true that pills play AstraZeneca (LSE: AZN) may not appear to be a bona-fide bargain on a near-term basis, I am convinced the company’s massive R&D investment should reap handsome rewards for more patient investors.

The enduring effect of exclusivity losses across key labels is expected to keep earnings under the cosh for a little while longer, and anticipated earnings dips of 1% and 2% for 2015 and 2016 respectively would represent five straight years of bottom-line decline. And such figures result in P/E multiples of 16.1 times for this year and 16.5 times for 2016, just outside the benchmark of 15 times that represents attractive value.

Still, I believe AstraZeneca’s rejuvenated pipeline and ambitious lab-building programme — combined with galloping drugs demand in emerging markets — should drive earnings through the roof looking further down the road, making now a good time to get in on the firm. And although the pharma giant is anticipated to keep the dividend locked at 280 cents per share through to the close of 2016, this projection still produces a bumper 4.1% yield.

Old Mutual

Like AstraZeneca, I believe that life insurance leviathan Old Mutual (LSE: OML) should enjoy splendid earnings expansion on the back of excellent developing market sales. The business — which straddles the continent of Africa — made it clear today that its future lies in emerging regions after offloading its Swiss Skandia Leben division to Life Invest Holding.

Despite recent cyclical headwinds in these regions, Old Mutual continues to benefit from the underserviced life insurance market in Africa and saw assets under management flip 10% higher during January-March, to $224bn. And with increasing income levels in these markets set to give revenues an extra boost, the insurer is expected to clock up earnings growth of 11% in 2015 and 10% next year.

These figures leave Old Mutual changing hands on P/E ratios of just 11.7 times and 10.8 times for 2015 and 2016 respectively, just above the touchstone of 10 times which represents bargain territory. And with the company predicted to lift the full-year dividend to 9.8p per share this year and 10.8p in 2016, corresponding yields of 4.2% and 4.6% make the business a lucrative pick for income hunters, too.

BAE Systems

With economic growth primed to boost defence budgets in the West, I believe that hardware sales at BAE Systems (LSE: BA) should be set to take off again following years of subdued contract orders. But the arms builder is not prepared to rest on recovering spend from its key US and UK customers, and recent measures in emerging regions — from restructuring its Saudi Arabian operations to setting up base in India — leaves the firm in great shape to benefit from the rising financial might of these territories.

Against this backcloth the City expects BAE Systems to rebound from last year’s 10% earnings decline with growth of 2% in 2015, and predictions of a further 6% uptick next year illustrate rising optimism over weapons sales looking ahead. And I believe these figures make BAE Systems a relative steal, the business changing hands on low earnings multiples of 13.1 times for this year and 12.3 times for 2016.

And helped by its terrific cash-generative qualities, BAE Systems is expected to keep dividends rattling higher during this period. An estimated 20.9p per share payment for 2015 creates a tasty 4% yield, while an anticipated 21.6p reward the following year pushes the yield to 4.2%.

DS Smith

I am convinced that boxbuilder DS Smith (LSE: SMDS) is in great shape to enjoy the fruits of improving consumer spending across Europe. The business — which creates packaging in the fast-moving consumer goods sector — noted that for the year concluding April 2015, “growth has been [recorded] across all regions, as the roll-out of our design centres and proposition continues to gain good customer traction.”

And DS Smith noted last week that it expects to complete the €300m purchase of Austria’s Duropack in the coming days, the firm having recently sealed competition clearance. The move will give a major fillip to the company’s footprint in the developing markets of Eastern Europe, a targeted hunting ground for the company.

Consequently the City expects DS Smith to follow a 13% earnings rise in fiscal 2015 with advances of 8% in both 2016 and 2017, figures which generate P/E ratios of just 14.2 times and 13.2 times respectively. And expectations of meaty bottom-line growth is expected to keep dividends marching higher, with a payout of 12.1p per share for this year and 12.9p for 2017 producing decent yields of 3.2% and 3.4%.

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Royston Wild owns shares of DS Smith. 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.