GlaxoSmithKline

At first glance pills play GlaxoSmithKline (LSE: GSK) may not be the most appetising stock selection for bargain hunters. Thanks to the never-ending problem of crippling patent losses, the Brentford business is expected to endure yet another earnings dip in 2015, this time by a chunky 20%. Consequently GlaxoSmithKline changes hands on a P/E rating of 18.2 times, sailing well outside the benchmark of 15 times that is widely considered decent value.

But scratch a little harder and I believe the company’s terrific value becomes apparent. GlaxoSmithKline has chucked the kitchen sink at transforming its product pipeline, and last week unveiled 40 new medicines spanning six growth areas. Of these, GlaxoSmithKline believes 80% have the potential to be “first-in-class,” and the firm plans to make 20 regulatory submissions by the close of the decade.

Helped by strong emerging market demand, GlaxoSmithKline is finally expected to turn the corner thanks to this sterling work, and an 11% bottom-line bounceback is currently predicted for 2016 alone, creating a P/E ratio of 16.5 times. When you throw in a planned dividend of 80p per share to 2017, yielding a very-decent 5.8%, I believe GlaxoSmithKline is extremely difficult to overlook.

BAE Systems

I am convinced BAE Systems (LSE: BA) is also a splendid stock selection for those seeking red-hot growth and income prospects at low prices. The West is facing a multitude of challenges not seen for decades, from dealing with territory disputes in the South China Sea, through to tackling Russia’s increasingly-expansionist foreign policy and battling ISIS militants in the Middle East.

This naturally plays into the hands of weapons builder BAE Systems, which has been a critical hardware supplier to the US and UK for decades now. This is far from a surprise given the vast sums the firm chucks at R&D, not to mention its insatiable appetite for acquisitions in galloping growth areas. And thanks to the rising spending power of emerging markets, BAE Systems’ cutting-edge technology is becoming more and more popular with new customers, particularly those of Asia.

With order activity back on the rise, BAE Systems is expected to recover from recent earnings weakness in 2016 to post a 5% earnings rise, reducing the P/E ratio from 11.7 times for the current period to a cut-price 11.3 times. On top of this, the arms specialist is anticipated to shell out dividends of 20.9p and 21.5p in 2015 and 2016 correspondingly, yielding a heady 4.7% and 4.8%.

Rexam

Drinks can manufacturer Rexam (LSE: REX) is an exceptionally-priced FTSE candidate in my opinion. The future of the company was hit with fresh uncertainty last month after the Ball Corporation’s (NYSE: BLL.US) attempted £4.4bn takeover was hit by a range of objections from the European Union’s Competition Commission. The deadline has now been extended to December 23.

The planned deal is now thought by many to be up in the air, with Ball now likely to face massive asset sales to force through any deal. Indeed, Brazil’s declaration that it also has huge competition concerns adds another layer of intrigue. The cash-and-shares deal is worth an estimated 610p per share, representing a chunky premium from Rexam’s current price of 545p.

Regardless of the fate of the deal, I believe the British manufacturer remains a great long-term growth pick, as rising wealth levels in developing regions boost beverage demand, and as a consequence sales of Rexam’s receptacles. The firm is expected to flip from a 2% earnings dip in 2015 to record an 8% rise in 2016, creating a very-decent P/E rating of 13.7 times for next year. And anticipated dividends of 17.3p per share for 2015 and 18p for 2016 create chunky yields of 3.1% and 3.3% correspondingly.

The post Are GlaxoSmithKline plc, BAE Systems plc And Rexam PLC Brilliant Bargains Or Value Traps? appeared first on The Motley Fool UK.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and Rexam. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.