Cheap or Expensive? BT Group plc, Taylor Wimpey plc & Randgold Resources Limited

Today I’ll be taking a look at telecoms group BT (LSE: BT-A), housebuilder Taylor Wimpey (LSE: TW) and gold miner Randgold Resources (LSE: RRS). Are there any bargains lurking amongst these three FTSE giants?

Best of both

Telecom services provider BT has performed well recently with steady growth for six straight years. And while analysts are talking about a 2% dip in earnings per share for the financial year just ended, normal service should be resumed this year with 3% growth predicted, followed by an even-better 9% for fiscal 2018.

The steady growth in earnings over the past few years has also been reflected in the dividend, which has been hiked every year since 2009. This policy looks set to continue with 13.94p forecast for the year just ended, followed by 15.67p for 2017, and 17.45p for fiscal 2018. This equates to prospective yields of 3.2%, 3.6% and 4% for the next three years. Not bad for a company that’s still enjoying growth.

So what about that all-important valuation? BT currently trades on 14 times forecast earnings for this year, falling to 13 for the year ending 31 March 2017. In my view the shares aren’t cheap enough to buy for growth alone, but after the dividends are factored-in, the shares could be tempting for investors looking for a best-of-both stock.

Bargain territory

British housebuilder Taylor Wimpey has achieved impressive growth over the last few years, along with the rest of the housebuilding sector. Our friends in the Square Mile are impressed and are expecting this growth to continue, albeit at a slower rate. They’re forecasting a 16% rise in earnings this year followed by a further 8% growth in 2017, and long may it continue.

This year is particularly interesting with regards to the dividend policy, which sees the full-year dividend leap from a modest 1.67p per share to a more manly 11.01p, and this continues next year when it increases to 11.68p. Obviously there’s some shift in policy here, but nobody’s complaining with the prospective yields forecast at 5.9% and 6.3% for the next couple of years.

Taylor Wimpey currently trades on 11 times forecast earnings for this year, falling to just 10 next year. These shares offer good value and a healthy-looking dividend. What more could you ask for?

Far too precious

Africa-focused gold miner Randgold Resources is basically a play on the price of gold, with the share price mirroring the fluctuations in the value of the precious metal. The shares have risen sharply since the start of the year, along with other precious metals miners such as Fresnillo and Centamin, as the wider market has become more volatile. 

Analysts are predicting a good year for Randgold, with 24% earnings growth expected this year, followed by a further 18% pencilled-in for 2018. However, the valuation looks a bit heady, with a forecast price-to-earnings ratio of 36 for this year, falling to 30 next year.

With no meaningful dividends on offer, the shares look too risky and too expensive to me.

Time to buy?

For me, Taylor Wimpey seems to be the most attractively valued company, with BT looking like a good medium-risk telecoms play. Randgold however looks too pricey and too unpredictable.

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Bilaal Mohamed has no position in any shares mentioned. 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.