3 Big-Cap Bargains Too Good To Miss: GlaxoSmithKline plc, Banco Santander SA And Royal Mail PLC

Royston Wild explains why GlaxoSmithKline plc (LON: GSK), Banco Santander SA (LON: BNC) and Royal Mail PLC (LON: RMG) are terrific picks for savvy value seekers.

| 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.

Today I am running my eye over three of the FTSE 100‘s best all-round value stocks.

GlaxoSmithKline

For pharmaceuticals giant GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US), the crushing effect of significant patent expirations on revenues performance is not expected to expire anytime soon. Indeed, the business is expected to punch a fourth successive annual earnings decline in 2015 as a result, and a 4% drop is currently chalked in by the City’s army of brokers.

However, I remain confident that GlaxoSmithKline has both the financial clout and the know-how get sales moving in the right direction in the coming years, achieved through a targeted R&D drive in hot growth areas and underpinned by strong emerging market demand. And the number crunchers are in agreement, with the medicines play predicted to rebound from next year and a 4% advance is currently anticipated in 2016.

Although the Brentford business changes hands on P/E ratios of 17.3 times for 2015 and 16.3 times for 2016 — above the threshold of 15 times which generally signals decent value — I reckon this is more than compensated for by market-smashing dividends. Indeed, GlaxoSmithKline is expected to meet its predicted payout of 80p per share in 2015, producing a 5.2% yield. And should earnings march higher thereafter as the City expects, I believe investors can look forward to even more lucrative yields in the coming years.

Banco Santander

Not only is global banking giant Santander (LSE: BNC) a terrific way to cotton on to improving economic conditions in core established markets like the UK, but I believe the Spanish bank’s ongoing expansion into Latin America makes it a great developing market play.

Years of significant restructuring, combined with terrific performance across its retail operations in core markets, has seen Santander emerge as an exceptional earnings generator in the post-recession landscape. And the bank is expected to punch further growth of 14% and 13% in 2015 and 2016 correspondingly, producing ultra-low P/E multiples of 11.8 times and 10.5 times for these years.

Santander stunned investors in January when it announced it was slashing the dividend by two-thirds, to 20 euro cents per share, this year in an attempt to bulk up its capital reserves. Still, it is worth bearing in mind that such a payout creates a decent yield of 3.2%. And with balance sheet reparations undertaken, I fully expect dividends to march higher again from 2016 in line with earnings expansion.

Royal Mail

With the rise of online shopping looking set to boost parcels volume both at home and in Europe, I believe that Royal Mail (LSE: RMG) is in great shape to enjoy splendid earnings growth in coming years. On top of this, the company’s ongoing modernisation drive still has plenty left in the tank and should keep on knocking chunks off its cost base.

The courier is expected to post a solid 23% earnings advance in the year concluding March 2015, leaving the business dealing on an attractive P/E ratio of 13.5 times. Although an anticipated 6% slip next year raises the earnings multiple of 14.7 times, this reverse is expected to be temporary, and a predicted 16% improvement in fiscal 2017 drives the ratio to just 12.2 times.

Furthermore, the City expects Royal Mail to keep dividends ticking higher throughout this period, with last year’s total payout of 13.3p per share predicted to surge to 20.4p for fiscal 2015, producing a meaty 4.7% yield. And dividends of 21p and 21.3p for 2016 and 2017 respectively push the yield to 4.9% and 5%.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »