4 Stocks With Huge Takeover Potential: Diageo plc, ITV plc, Just Eat PLC & Talktalk Telecom Group PLC

These 4 stocks look ripe for bid approaches: Diageo plc (LON: DGE), ITV plc (LON: ITV), Just Eat PLC (LON: JE) and Talktalk Telecom Group PLC (LON: TALK)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

One of the great events in an investor’s life is when an entity makes an offer for a company in which the investor has a shareholding. This almost inevitably means that the company’s shares move significantly higher and, more often than not, ends in a tidy profit for the investor.

Clearly, with interest rates being ultra-low and having the potential to move substantially higher in the months ahead, bid approaches are likely to become more frequent. In addition, generous cash balances at a number of major corporations across the globe and a relatively upbeat long term outlook for the world economy means that companies may be more confident about engaging in M&A activity than they have been for a number of years.

One sector which is a hotbed of takeover activity is the beverages industry. AB InBev recently made a bid for SABMiller and, while they are both brewing companies, sector peer and spirit specialist Diageo (LSE: DGE) could also be a takeover target in future. That’s because it has a stable of superb brands which command a relatively high degree of customer loyalty. Furthermore, it is a truly global player, with exposure to all main markets across the world and, thanks to deals inked in the last few years, it now has major exposure to China and India, which are set to remain two high-growth regions for spirits in the medium to long term.

In addition, Diageo has also posted a fall in its share price of 8% in the last six months and, while it still trades on a price to earnings (P/E) ratio of 19.5, this appears to offer good value for money for such a high quality business.

Similarly, ITV (LSE: ITV) is also a potential bid target. In recent years it has significantly improved the quality of its content and has diversified its channel range. This, combined with an improving UK economy, has caused ITV’s advertising revenues to increase at a rapid rate, leading to a rise in net profit of 23% in each of the last two years.

Looking ahead, ITV is forecast to post a rise in earnings of 16% this year, followed by further growth of 10% in the following year. And, with its shares trading on a P/E ratio of 15.6, they appear to offer excellent value for money given the company’s outlook.

Meanwhile, media company Talktalk (LSE: TALK) is also a very appealing company. That’s largely because it is an established quad play (broadband, mobile, pay-tv and landline) provider and, with a number of larger companies seeking to enter all four markets, it could be a straightforward means of doing so.

In addition, Talktalk also offers excellent value for money given its near-term outlook. For example, it is due to post an increase in its bottom line of 70% this year, followed by 53% next year. This puts in on a price to earnings growth (PEG) ratio of just 0.3, which indicates that its shares are a bargain despite rising by 6% in the last month.

Another company ripe for takeover is online takeaway ordering business, Just Eat (LSE: JE). It offers global exposure and is benefitting from a substantial tailwind as people begin to favour online ordering over calling or going out for fast food. Clearly, a number of established fast food companies do not have an online ordering facility and, alongside its appealing regional exposure, this makes Just Eat a neat acquisition for such businesses. Certainly, it may trade on a P/E ratio of 67 but, with staggering growth being pencilled in for the next two years, its PEG ratio of 0.7 indicates that it could be a good value purchase for a competitor.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Talktalk and ITV. 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.

More on Investing Articles

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »