As fear grips the market, investors have been dumping their stock holdings. The FTSE 100 has been trading firmly below 7,000 points. But in the scramble for the safe haven of cash, I think the baby has been thrown out with the bath water.

It’s during such times that savvy investors hunt down stocks where there has been unwarranted carnage. In doing so, however, it’s imperative to avoid a bull trap.

We’ve already seen many mega cap tech stocks in the US recover from their June lows. But for me, this is the sign of a classic bear market rally and I still see significant downside risk here.

Retail in the doldrums

In the bloodbath, one stock has really caught my eye, Associated British Foods (LSE: ABF). Its share price is now trading at levels not seen since 2012.

ABF does face some significant challenges. Last month, its retail division issued a profit warning. True, total sales at the Primark chain are expected to be 40% higher than last year. But that’s mostly due to the fact that all its stores are now open and trading as normal.

On a like-for-like basis, sales this quarter are expected to be 9% below pre-Covid levels. Comparable sales across Europe should fall behind by as much as 18%.

To protect its cost-conscious brand image, Primark has decided not to implement any further price increases. Consequently, operating profit margin in 2023 is expected to be below the 8% projected for the second half of this financial year.

Diversification is key

However, ABF is a lot more than just Primark. Some 60% of its revenues comes from a diversified group of businesses, including grocery, sugar, agriculture and ingredients. Many of these have been thriving in an inflationary environment.

AB Sugar is one of the largest sugar producers in the world. Revenues at this division are significantly ahead of last year, driven by soaring sugar prices.

Of course, like many commodities, sugar prices have come down recently. However, I still believe the fundamentals are good for this sector, particularly with supply side constraints still evident. Indeed, ABF is predicting European sugar demand will remain in excess of production for some time.

It’s a similar story in its grocery division where increased prices should drive revenue growth. Many of its brands are household names, not only in the UK, but across the globe. These include Twinings, Ovaltine, and Silver Spoon.

Keep it in the family

Over half the issued share capital of ABF is owned by the Weston family. The business is on the whole conservatively run with a history of prudent financial management. This, I believe, is a source of strength in the present economic environment.

ABF is a strong, well-capitalised company with net cash of £1.5bn. This financial strength has enabled Primark to advance the inventory purchase of its winter stock in anticipation of supply chain bottlenecks. Primark has also recently launched a new website and is to launch a trial for click-and-collect.

With a proven business model and excellent long-term growth potential across its businesses, I view ABF as a no-brainer buy. That is why, over the last few weeks, I’ve been adding to my position here.

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Andrew Mackie owns shares in Associated British Foods. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Cineworld shares: a horror story

You probably know that 2020 has been something of a horror show for the once-mighty company. It was priced around 220p a pop back in January. But Cineworld shares tumbled 95% to just 21p by March as the coronavirus ravaged the globe and lockdowns were enforced.

Some believe the worst to be over. Broker Peel Hunt, for example, recently slapped a price target of 180p on the stock! But I’m less enthusiastic for now. 

True, many of the company’s sites have now reopened. However, there’s still a dearth of new releases. Likely blockbusters (Top Gun 2, James Bond) have had their release dates put back as studios seek to maximise their investment returns.

News that movie-goers must wear masks when visiting is another setback. Why bother with a trip out when you can have a more comfortable experience via Netflix or Amazon Prime at home?

Ominously, Cineworld shares also remain among the most shorted on the London stock market. The only company more hated is Hammerson — the shopping centre owner-manager. When you consider just how much debt the former has on its books, this isn’t surprising.

Yes, any remotely positive comments from management on the company’s outlook next month could see Cineworld shares rally as shorters are ‘squeezed’ and forced to buy back in. With so much working against it right now, however, there are surely far easier ways of making money on the markets.

A better bet…

Cineworld shares aren’t the investment that’s given holders a rollercoaster ride in 2020. Fast-fashion behemoth Boohoo‘s (LSE: BOO) share price has been jumping all over the (online) shop thanks to an odd mixture of soaring sales and negative publicity.

Interim numbers are due on 30 September. I suspect another big move is on the cards. If recent sales momentum has been maintained, this should be in an upwards direction.

Back in June, the company reported “very strong trading and operational performance“. Despite the coronavirus crisis, it now expected to beat previous market expectations for the full-year. What a contrast to the state of affairs at Cineworld!

On the other hand, accusations of poor pay and working conditions in factories supplying clothes to the company have dented BOO’s reputation. An independent review is in progress but it’s clear investors will be looking for an update on what steps it has taken to rectify things. The share price could be punished again if this is deemed insufficient. 

As a holder, I’m clearly biased on Boohoo’s prospects. Notwithstanding this, I’d be surprised if recent woes prove anything more than temporary. Similar cases have involved retail titans such as Amazon, Associated British Foods (Primark) and JD Sports. They show that no business is beyond reproach, particularly those with links to the rag trade. They’ve all since recovered.

As long as issues are swiftly rectified, a sustained rise in Boohoo’s price looks far more likely than it is for Cineworld shares. 

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers owns shares in boohoo group. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Associated British Foods and boohoo group and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A share of £366m

One company I’d be happy to invest in today is Associated British Foods (LSE: ABF), the owner of Primark, as well as several food businesses. The group released its latest annual results this morning and reported a profit of £1.3bn. When it pays its final dividend on 10 January, it will have distributed £366m to shareholders this financial year, 3% more than last year.

Forget tonight’s £74m EuroMillions jackpot! I’d rather put my money in ABF and have a share of that £366m. And that’s just one year. If the company continues increasing its annual profits and dividends, it’ll hand me more and more cash each year. Furthermore, if I regularly buy more shares and reinvest my dividends, I’ll own a bigger and bigger part of the business, meaning more of those annual millions paid to shareholders will come my way.

Rising profits and dividends would also see the business become more valuable. If so, other investors would be willing to pay higher prices for owning a share of it, meaning the value of my shares would increase.

Let me tell you now about ABF’s results today, and why I think now is a great time to invest in the company for the long term.

Well-positioned

Primark is ABF’s biggest business, accounting for half of the group’s revenue. This increased 4%, with operating profit rising 8% to £913m. The group’s grocery business (around 20% of revenue), which includes brands such as Twinings, Dorset Cereals and Ryvita, also performed strongly. Revenue increased 2% and operating profit 10% to £380m.

Profits at the group’s three smaller divisions, sugar, ingredients and agriculture (each around 10% of revenue), were lower than last year. Sugar profits were hit particularly hard — down to £26m from £123m — in a year impacted by a radical change in the European sugar market.

However, the performance of Primark and grocery more than offset the profit weakness in the other divisions. Group underlying earnings per share (EPS) increased 2% on 2% higher revenue. Management described it as a “resilient performance,” and looking ahead, said ABF is “well-positioned for further progress, with the continued expansion of Primark, a material improvement in our sugar profit and strong profit growth in grocery.”

Discount shares

ABF’s shares are up over 4% on the day, as I’m writing, and top the FTSE 100 risers board. Nevertheless, at 2,350p they remain well below their all-time high of over 3,500p. A valuation of 17.1 times today’s reported EPS and running dividend yield of 2% is generous by historical standards, and one big reason why I think now is a great time to buy the shares.

Another reason is a recent assessment by analysts at Berenberg. Comparing ABF’s smaller businesses with the valuations of their peers, Berenberg concluded that Primark is at a 44% discount to Next compared with its usual historical premium of 19%. This “despite its superior business model … and significant international growth opportunity.”

All told, I’d much rather buy ABF’s discount shares, and long-term profit and dividend growth prospects, than a ticket in tonight’s EuroMillions lottery!

The post Forget tonight’s £74m EuroMillions jackpot! I’d buy this FTSE 100 stock appeared first on The Motley Fool UK.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

For long-term real growth in capital and income, I’d look to invest in FTSE 100 companies in a Stocks & Shares ISA. Here, I’ll explain why Associated British Foods (LSE: ABF) and Coca-Cola HBC (LSE: CCH) are two such businesses I’d happily buy today.

Prudent stewardship

ABF generated sales of £15.6bn last year. The group is geographically diversified, with 60% of sales outside the UK. It’s also diversified by business segment, with operations in grocery, ingredients, sugar and agriculture, but also clothing retail — namely, Primark. The value fashion chain has become the jewel in the crown, responsible for almost half of group sales last year.

As well as its attractive diversification, shareholders also enjoy the benefit of prudent stewardship that comes with a company still majority owned by its founding family. These benefits include a strong balance sheet (net cash of £386m last reported), and a well-covered dividend that’s increased each year for as long as I can remember.

For ABF’s current trading year (ending 30 September), management expects earnings per share (EPS) to be in line with the prior year’s 134.9p, but City analysts expect this to rise 12% to 151.4p next year. At a share price of 2,265p, this gives a price-to-earnings (P/E) ratio of 15. I think it represents very good value for such a high-quality and reliable business.

I reckon investors today can expect dividends of around 48p a share over the next 12 months. At the current share price, this would represent a yield of 2.1%, compared with the aforementioned best-buy 1.46% interest rate from an easy-access Cash ISA.

Defensive and attractive

With sales of €6.7bn (£6bn at current exchange rates), Coca-Cola HBC is one of the largest bottling and distribution partners of The Coca-Cola Company. Operating in 28 countries, its established markets (37% of last year’s revenues) are Austria, Cyprus, Greece, Italy, Northern Ireland, Republic of Ireland and Switzerland. It’s also developing, and emerging markets extend from central Europe to the east coast of Russia, and it also operates in Nigeria.

Backed by a global titan and an array of popular brands, including four of the world’s five best-selling, non-alcoholic, ready-to drink beverages (Coca‑Cola, Coca‑Cola Light, Sprite and Fanta), I see Coca-Cola HBC as a strong, defensive business operating in an attractive mix of established and emerging markets.

City analysts are forecasting 8% EPS growth to €1.41 (127p) for its current trading year (ending 31 December), followed by 11% growth to €1.57 (141p) next year. The latter gives a P/E of 19 at a share price of 2,670p. This is a premium rating but fully merited, in my opinion, due to the aforementioned defensive and other attractive qualities of the business.

Buyers of the stock today can look forward to an annual ordinary dividend of 63 eurocents (57p) a share in the next 12 months, according to City analysts. This would give the same initial yield of 2.1% as ABF. However, analysts fancy Coca-Cola HBC will also pay a special dividend that would more than double the yield this year.

The post Forget a Cash ISA! I’d buy these 2 FTSE 100 growth-and-income shares appeared first on The Motley Fool UK.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, if you’re reading this article you probably prefer to invest in individual stocks, or are considering doing so. If I had £3,000 on hand today, I’d split it three ways and buy shares in FTSE 100 giants Associated British Foods (LSE: ABF), Smiths Group (LSE: SMIN) and BAE Systems (LSE: BA).

I think these companies are trading at very attractive valuations. And, as a bonus, if you’re in the early stages of building a stock portfolio, they offer considerably more business and geographical diversification than you might think.

Great entry point

Associated British Foods’ name doesn’t do justice to either its international reach or to the range of businesses under its ownership. Around 60% of the group’s revenue comes from outside Britain and around 60% from non-food businesses.

Retailer Primark is ABF’s biggest business, and its expansion into the US — still in its early days — represents a huge long-term growth opportunity. Meanwhile, its grocery, ingredients and agriculture divisions are solid performers, if lacking Primark’s dynamic growth. Its fifth division, sugar, has faced external headwinds in recent years, but improvement is expected in 2020.

ABF trades on a current-year forecast price-to-earnings (P/E) ratio of 16.8, with a rock-solid dividend yield of 2.1% and a long record of dividend growth. The P/E is low by historical standards, and I believe this is a great entry point for a long-term investment in the business.

Maximising value for investors

Industrial technology group Smiths also owns a range of businesses, serving diverse industries in diverse geographies. The company is evolving under new management. We’ve also seen disposals of non-core businesses and investment in high-growth areas where the group has scale and technology leadership.

The biggest news on this front was an announcement last November that management is preparing to separate the medical division from the rest of the group, which I think should prove value-creative for shareholders.

Smiths trades on a current-year forecast P/E of 14.8 and dividend yield of 3.2%. I view this as an attractive valuation, due to management’s focus on maximising value for shareholders. This should include a continuation of the group’s excellent long-term dividend record.

Shares a steal

My third pick, BAE Systems, also boasts a fine dividend history. In addition, it currently sports the lowest earnings multiple and highest yield of the three stocks. The forecast P/E is 10.5 and the prospective yield is 4.9%.

The company is focused on the defence sector, and its work ranges from massive military kit (for land, air and sea) to cyber and intelligence. The UK and US governments are major customers, but other markets include Saudi Arabia (18% of group revenue).

The latter territory’s behind the current weakness in BAE’s share price. The company has said a German ban on arms exports to Saudi Arabia, after the killing of journalist Jamal Khashoggi, could potentially scupper a multibillion-pound Typhoon fighter jets deal. I think there’ll ultimately be a pragmatic outcome and that BAE’s shares are a steal.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Buffett qualities

If you’re looking to buy and hold a stock forever, you need management of quality and integrity, who run the business with a focus on its long-term growth, as opposed to hitting short-term targets. Descendents of ABF’s founding family continue to steer the company and are major shareholders. As such, the business is stewarded with a generational perspective, making it an attractive proposition as a lifetime investment.

Buffett also likes to see little or no debt in a company, because a strong balance sheet is a great asset during downturns in the economic cycle that are inevitable if you’re holding a stock over a long period. ABF today reported net cash of £614m at its financial year-end of 15 September and historically has maintained a robust balance sheet.

Buffett likes high profit margins. Primark, in particular, scores excellently here and today’s results showed an uptick in operating margin to 11.3% from 10.4% last year. Strong consumer brands are another Buffett favourite (Coca-Cola is one of his longstanding holdings). ABF has a number of much-loved brands within its grocery division, including Ovaltine and Twinings, both of which performed particularly strongly over the last year. Finally, return on capital employed (ROCE) is a key measure for Buffett, because it shows how efficient a company is at generating profits from its capital. Today’s results showed ABF maintaining its strong ROCE at over 20%.

Still a steal

At the time of the group’s pre-close trading update in September, analysts were forecasting earnings per share (EPS) of 133.5p and a dividend of 43.75p for the year. The shares were trading at 2,250p, giving a price-to-earnings (P/E) ratio of 17 and a dividend yield of 1.9%. I noted that the stock hadn’t been this cheap for five years and I reckoned it was a steal.

Actual EPS came in at 134.9p and the dividend at 45p, which explains why the shares are at the top of the FTSE 100 leader board as I’m writing with a 2.5% rise on the day to 2,448p. The P/E is now a little above 18 and the dividend yield is 1.8%, and while the company has guided that it expects no advance in EPS this year, I continue to rate the stock a ‘buy’.

The one disappointing division at the moment among ABF’s businesses is sugar. Historically, profits from this arm have been volatile at the best of times but the recent ending of the EU sugar regime and removal of sales quotas has seen EU prices move very substantially lower, adversely affecting ABF’s UK and Spanish businesses (its African sugar business continued to be highly profitable).

Weak EU sugar prices are behind the guidance of no advance in EPS this year, but what’s one year in a holding period of forever?

The post Why I’d buy this FTSE 100 stock with Warren Buffett qualities today appeared first on The Motley Fool UK.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods and Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The shares fell as much as 4% in early deals, but have since pared losses to less than 1%, changing hands at around 2,250p, as I’m writing. This is 33% below their 52-week high of 3,371p and they’re now at a level last seen in 2013. Here’s why I believe the stock is a bargain buy at the current price.

Strong progress

The table below shows some of ABF’s key numbers for 2017/forecast 2018 and for 2013, when the share price was last at around its current level.

As you can see, group revenue and operating profit, and EPS and dividend per share have all advanced nicely since 2013. ROCE has also increased from what was already a strong 18.5% in 2013. ROCE is a measure of how efficient a company is at generating profits from its capital and is much-favoured by legendary investor Warren Buffett.

One result of the current share price being at around the same level as five years ago, while the business has made strong progress, is that the P/E has come down from 23 in 2013 to 18 today (and 17 based on current-year forecast EPS). Historically, this is a cheap rating for ABF, which at times has traded on a P/E of as high as 30. Another result is that the dividend yield on offer has moved up from 1.4% in 2013 to pushing 2% for investors today.

A lot to like

In today’s trading update, ABF said strong profit performances from Primark, Grocery, Agriculture and Ingredients are expected to more than offset the adverse effect of lower EU sugar prices. Profits in the Sugar division can be volatile, this being a commodity business: 2013 was a bumper year with an operating profit of £435m (as shown in the table above), while 2016 was a lean year with a profit of just £34m.

As a conglomerate, there will always be some parts of the group performing better than others, but I view this diversification positively. Another big plus is the group’s geographical diversification, with two thirds of operating profit being earned outside the UK. Finally, Primark’s value positioning, together with strong brands in Grocery (including Twinings, Ovaltine and Patak’s) means the group has some strong defensive qualities.

Primary growth engine Primark continues to open new stores in the UK and Europe. More recently, it’s entered the US, where it’s sensibly expanding with restraint at this stage, as it learns about the market. I believe the outlook for Primark, supported by ABF’s other businesses, is bright and makes the current depressed share price a steal.

The post This FTSE 100 stock hasn’t been this cheap for 5 years appeared first on The Motley Fool UK.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A diversified portfolio, including both defensive and cyclical businesses, bought when they’re trading at good or fair value, should deliver excellent long-term results. With this in mind, I’ve got two Footsie stocks for 2018 and beyond, which I consider to be great businesses trading at fair prices.

Huge growth opportunity

Associated British Foods (LSE: ABF) isn’t all about value fashion phenomenon Primark — but a good bit of it is. Primark contributed £735m operating profit in the last financial year, representing over 50% of the group’s total.

Nevertheless, ABF is a conglomerate with various businesses and wide geographical diversification. The group has some defensive qualities, including Primark’s value positioning and a grocery business that’s home to trusted brands, such as Twinings Ovaltine and Ryvita. Its sugar business is more volatile but delivers nice bonuses in bumper years: annual profits have ranged from £34m to £510m over the last decade.

ABF’s shares are trading below their 2017 high of over 3,300p. At around 21 times forecast earnings for the year to September 2018, the multiple is still relatively high and I wouldn’t consider it particularly attractive, if it wasn’t for the presence of Primark. The retailer is already exploiting what is, I believe, a huge global opportunity. The scale? As I wrote a couple of years ago, “there seems no reason why, over the next decade or two, it can’t become as big as H&M, which is currently three times the size of Primark by sales and seven times the size by space.” On this basis, I rate ABF a ‘buy’.

History on its side

One thing you can’t say about asset manager Schroders (LSE: SDR) is that it has defensive qualities. Its performance is linked to financial markets. Indeed, it can be considered a geared proxy for the FTSE 100. Provided management does a good job through periods of downside volatility, it should outperform the market over the long term.

History is on its side. Founded in 1804 and still controlled by descendants of the founding family, the firm is conservatively managed and maintains a strong balance sheet. A measure of its prudence and resilience is the fact that it was able to maintain its dividend through the financial crisis, when other companies were cutting their payouts left, right and centre.

In common with some other family-controlled businesses, Schroders has two share classes: voting and non-voting. The latter have the ticker SDRC and trade at a discount to the voting shares, although they have exactly the same economic rights. The fact that you’ll pay just 11.4 times forecast 2018 earnings for the non-voting shares compared with 16 times for the voting, is unlikely to be of any real benefit, because the discount is long-established and likely to persist.

However, where you do benefit from buying the non-voting shares is with the dividend: a prospective yield of 4.4%, compared with 3.1% on the voting shares. I rate the stock a ‘buy’ and I’ll be remembering the ticker is SDRC for the boosted yield!

The post Two FTSE 100 stocks I’d buy for 2018 appeared first on The Motley Fool UK.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Schroders (Non-Voting). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Ahead of the update, the City consensus earnings forecast was 123p a share for the FTSE 100 group’s financial year ending 30 September. I reckon we can upgrade that to 125p after management said today that a stronger profit delivery than expected from Primark in Q3 “has marginally improved our group outlook for the full year.”

Nevertheless, based on 125p earnings and a slightly lower share price (it’s eased back to 3,000p, as I’m writing), conventional wisdom would say that the resulting price-to earnings (P/E) ratio of 24 still leaves the shares looking expensive. However, they’ve traded higher in the past — an all-time peak of 3,600p in December 2015 — and I believe they can surpass this high-water mark in the next few years.

Primark powers on

ABF said today that sales in the year-to-date at its biggest growth engine, Primark, were 13% ahead of last year at constant currency (15% ahead in the last 16 weeks) and 21% ahead at actual exchange rates. This helped drive group sales up 10% at constant currency and 20% at actual exchange rates.

Primark has a huge growth opportunity, with expansion in Europe continuing apace and its more recent entry into the US already looking highly promising. But it’s not all about Primark. The conglomerate’s other businesses have their parts to play.

Sugar rush

In particular, ABF’s sugar business should contribute significant profits with the sweet stuff emerging from a period of weakness in world prices. Back in 2012, the division contributed £510m operating profit compared with £567m for the rest of the group. By last year, the contribution from sugar had fallen to just £34m. However, with higher prices, the business contributed £123m in the first half of this year alone.

With Primark’s long growth runway, sugar in a sweetening spot and ABF’s other divisions — grocery, agriculture and ingredients — being solid, defensive businesses, I believe the shares are actually a better buy than many stocks trading on lower P/E multiples.

Accelerating delivery of value

Blue-chip consumer goods giant Unilever (LSE: ULVR) is another company I consider worth buying today, despite being on a relatively high P/E. The multiple is 22, based on a current share price of around 4,100p and a City consensus earnings forecast of 187p a share.

Unilever rejected a 4,000p a share bid from Warren Buffett-backed Kraft Heinz earlier this year. The Footsie group’s management has now taken steps “to accelerate delivery of value for the benefit of our shareholders.” These convince me that the shares continue to offer good value, despite having risen above the level at which the US giant pitched its bid.

The steps include upping leverage and a £4.4bn share buy-back and 12% dividend increase this year (giving a forecast yield of 3%). The company is also to exit its Spreads business and is targeting a group operating margin of 20% by 2020.

Due to these developments, I believe Unilever’s premium P/E is more than justified by the prospects for accelerated earnings and dividend growth.

The post 2 ‘overvalued’ FTSE 100 stocks I’d buy today appeared first on The Motley Fool UK.

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G A Chester has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Data released last week from the Office for National Statistics (ONS) may have caused some to doubt forecasts of slumping high street spend in the years ahead — sales in the UK rose 1.4% in February, obliterating analyst expectations of a 0.4% advance.

But broadly speaking, the retail trend remains on a downward slope. Despite last month’s meaty uptick, total sales volumes still fell 1.4% in the three months to February, the biggest quarterly slump for seven years. And it is difficult to see how sales can keep growing as inflationary pressures build in the months ahead.

However, this situation is likely to drive shoppers into the arms of Associated British Foods’ Primark as they squeeze every last penny from their clothing budgets.

Global great

And the prospect of exploding sales in the UK isn’t the only reason for investors to be excited, of course. Indeed, Associated British Foods announced in January that new Primark’s stores spanning Britain, Germany, France, Ireland, Spain, The Netherlands, Italy and the US “traded strongly” during the 16 weeks to January 7.

Consequently the business said that revenues leapt 22% year-on-year, or 11% on a constant currency basis.

City analysts expect the company’s bottom line to keep growing in the years ahead as demand for its fashion offer takes off, and have pencilled-in earnings growth of 12% and 9% in the years to September 2017 and 2018 respectively.

These projections leave Associated British Foods dealing on a slightly-heady forward P/E ratio of 22.1 times. However, I reckon this is still good value given the massive global potential of the Primark brand, not to mention improving conditions for the firm’s food operations.

And I believe Associated British Foods’ upcoming set of interims (scheduled for Wednesday, April 19) could drive the share price higher still.

Screw star

Likewise, I reckon bolt-and-fastening specilaist Trifast’s (LSE: TRI) next trading update slated for late April could lead to extra buying appetite.

The number crunchers expect Trifast to follow a 17% earnings uptick in the year to March 2017 with more modest rises of 2% in the following two fiscal periods. But I reckon these figures could be in line for significant upgrades, leaving the manufacturer pretty well priced on a prospective P/E ratio of 17.4 times.

Indeed, Trifast advised last month that “given group trading in Q3 and the further FX tailwinds, the board now expects the group’s performance for the full year to be slightly ahead of its previous expectations.”

The company continues to enjoy solid trading conditions in Europe and the US, while it has also seen activity pick up in its other core territory of Asia as demand has bounced back in the latter half of the fiscal year.

And I believe Trifast’s geographic expansion programme, and with it robust relationships with OEMs the world over, should keep delivering ample shareholder returns long into the future.

The post 2 growth stocks I’d buy in April 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 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.