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Why Barclays PLC, AstraZeneca plc & DS Smith plc Are Trading Far Too Cheaply!

Today I am taking a look at the investment prospects of three blue-chip bargains.

The remedy for poor returns

Thanks to its revamped R&D strategy, I believe that pills provider AstraZeneca (LSE: AZN) is a great long-term stock bet for bargain hunters. The London business is doubling-down on its efforts in three hot growth areas, namely oncology; cardiovascular and metabolic diseases; and respiratory, inflammation and autoimmunity.

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And the company is looking for between eight and 10 regulatory approvals for its drugs by the end of 2016, the company having already chalked up three so far this year.

While it is true patent lapses on key products are set to remain a headache — earnings dips of 1% and 5% are pencilled in for 2015 and 2016 respectively — I believe AstraZeneca’s rejuvenated pipeline, allied with surging healthcare demand the world over, should power earnings further out. And consequently a prospective P/E rating of 16.1 times represents a decent level to get in at.

Indeed, AstraZeneca’s improving revenues outlook is expected to offer up market-busting dividends despite the colossal sums required for R&D. A predicted 280-US-cent-per-share reward through to the end of 2016 creates an excellent 4.1% yield.

Box up a bargain

I am convinced that boxbuilder DS Smith (LSE: SMDS) is also a top stock for those seeking great growth at brilliant prices, even if this week’s financials left something to be desired. The business advised that the impact of adverse currency movements, combined with restructuring at its European operations, drove pre-tax profit 26% lower during May-October, to £91m.

Still, DS Smith advised that volumes continue to grow ahead of the wider market, and its focus on creating cutting-edge packaging technologies — allied with ambitious expansion on the continent — providing plenty of upside for the coming years in my opinion. The manufacturer also announced the purchase of Turkish corrugated packaging specialist Milas Ambalaj yesterday.

DS Smith is expected to clock up earnings growth of 7% and 12% for the years concluding April 2016 and 2017 correspondingly, resulting in very reasonable P/E ratios of 15.9 times and 14.2 times. And predicted dividends of 12.3p per share for 2016 and 13.3p for 2017 create handy yields of 3% and 3% accordingly.

A financial favourite

Life has the potential to get a little more bumpy over at Barclays (LSE: BARC) following the installation of Jes Staley as chief executive during the autumn. The subsequent resurrection of the firm’s Investment Bank is a highly-divisive move, significantly increasing the bank’s risk profile that previous company head Antony Jenkins had made a point of significantly reducing.

And Barclays’ changing focus attracted the headlines again this week after Reuters reported that Staley had attempted to hire Blythe Masters — the inventor of controversial credit default swaps — to oversee the division.

While the aims of the new administration creates some uncertainty going forward, I believe there is still plenty for investors to get excited about — the improving UK economy should continue to lend Barclays’ High Street operations a hand, while the firm’s Barclaycard division and African assets provide plenty of long-term opportunities.

Barclays is expected to enjoy earnings upticks to the tune of 28% and 19% in 2015 and 2016 respectively, producing ultra-low P/E ratios of 10.2 times and 8.3 times. And an estimated dividend of 6.5p per share for 2015, yielding 2.9%, is expected to leap to 8.2p in 2016, driving the yield to 3.7%.

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Royston Wild owns shares of DS Smith. The Motley Fool UK has recommended AstraZeneca, Barclays, and DS Smith. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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