3 Blue-Chip Marvels Trading At Unmissable Prices: GlaxoSmithKline plc, easyJet plc And National Grid plc

Royston Wild explains why GlaxoSmithKline plc (LON: GSK), easyJet plc (LON: EZJ) and National Grid plc (LON: NG) should be on the shopping list of all 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 looking at three stocks that provide stunning bang for one’s buck.

GlaxoSmithKline

The problem of serious patent losses continues to stunt investor appetite for pharma plays such as GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US). Shares in the firm have steadily declined in recent weeks and have shed more than 10% since mid-April, but I believe that this recent weakness represents a fresh buying opportunity.

You see, while revenues losses from the likes of its Advair asthma treatment are likely to remain a bugbear, GlaxoSmithKline is throwing everything including the kitchen sink at producing the next line of profits drivers. The company currently has around 40 products in Phase II or III development, and while the business of drugs development is often fraught with delays and heavy capital drain, I reckon GlaxoSmithKline’s exceptional track record in these matters should underpin excellent earnings growth — indeed, its Tivicay anti-HIV drug is touted as a future superstar.

Of course the pills play’s bubbly pipeline is not set to offset the impact of key exclusivity losses just yet, and GlaxoSmithKline is anticipated to punch a further 11% earnings decline in 2015. Still, the fruits of these labours are expected to translate into tangible gains from next year, and a 7% uptick is currently pencilled in by the City. Accordingly a P/E multiple of 16.8 times for this year falls to just 15.5 times for 2015, around the watermark of 15 times that indicates attractive value.

On top of this, GlaxoSmithKline is also on course to maintain market-beating dividend yields in the coming years, the company having pledged payouts of 80p per share through to 2017. These figures create a large yield of 5.5% during this period, and I believe a backcloth of strong earnings growth should drive rewards still higher looking further down the road.

easyJet

I reckon that budget carrier easyJet (LSE: EZJ) is a sound choice for those seeking delicious value for money. Demand for cheap travel from holidaymakers and business travellers alike is showing no signs of slowing, a trend which prompted Europe’s airlines to boost the number of seats in the short-haul market to 20.2 million seats in October-March, up 5.2% on an annualised basis.

With easyJet expanding the number of planes, routes and airports from which it operates — and boosted by the likelihood of lower fuel prices looking ahead — I believe earnings should continue soaring higher. This view is shared by the number crunchers, and the airline is expected to punch growth of 14% and 11% for the years concluding September 2015 and 2016 correspondingly. As a result the carrier boasts ultra-low P/E ratings of 13.2 times and 11.9 times for these years.

In line with this bubbly earnings outlook, easyJet is predicted to hike the dividend from 45.4p per share last year to 53.1p in the current period, producing a decent yield of 3.1%. And expectations of a further raise in 2016, to 59.5p, drives the yield to a juicy 3.5%.

National Grid

I believe that National Grid’s (LSE: NG) (NYSE: NGG.US) vertically-integrated operations make it a more attractive selection that any of the UK’s other utilities giants, its model allowing it to dodge regulatory scrutiny over its profitability and therefore any potentially-draconian action. Rather, the London firm is benefitting from OFGEM’s RIIO price controls — measures designed to curtail capital seepage — a terrific omen for earnings and dividend hunters.

With National Grid also aggressively building its asset base in the UK as well as North America, I believe shareholder returns should head for the skies in the coming years. In the meantime, the effect of heavy investment is expected to push earnings fractionally lower in the year concluding March 2016, although a 3% bounce in the following 12 months is a sign of things to come. And this predicted uptick also pushes a decent earnings multiple of 15.6 times for this year to an even-better 15.1 times next year.

Subsequently the City also expects dividends to continue steadily rising, and a payment of 42.87p per share last year is anticipated to advance to 44.4p in the current period, resulting in a monster 5% yield. And this rises to 5.1% for 2017 amid expectations of a 45.6p reward.

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

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »