Here are 5 value shares with attractive near-term growth prospects:
Prudential
Investors may already know of the Prudential (LSE: PRU)’s fast growing business in Asia, but growth outside Asia is also impressive. Its US life business, Jackson, has been performing very strongly, with profits growing actually growing faster than in Asia in recent years. This is because of rapid growth in its variable annuity sales and recently robust investment performances in the US.
In the UK, the Pru will be hit hard by falling annuity sales, following reforms made to the pension industry, which allowed pensioners to draw-down from their pension pots without the need to purchase annuities. But, its asset management business in the UK and Europe, M&G Investments, is performing well, particularly with strong net inflow from Europe. M&G’s assets under management rose 9% over the previous year, to total an all time high of £269.6 million, at the end of the March 2015.
All things taken into account, analysts expect earnings per share (EPS) will rise 15% this year to 111.3 pence, which gives the Pru a forward P/E of 14.0. Its forward dividend yield is 2.5%, based on expected dividends of 39.75 pence per share for the coming year. The Pru clearly trades at a premium to most European life insurers, but its focus to faster growing regions in the US and Asia should mean its higher valuation multiples are well justified.
In the short term though, the Pru’s growth could face speed bumps, because of renewed uncertainty with stock markets and slowing emerging market economies.
Aviva
Aviva (LSE: AV) may be exposed to slower growing markets in the UK and Europe, but the company’s scale in those markets should mean that the insurer will benefit better from revenue and cost synergies. This is further helped by its recent merger with Friends Life, which should bring in additional cost savings of around £225 million yearly by 2017.
Analysts expect adjusted EPS will fall by 5% this year, after a strong performance in 2014. But, this still implies a very attractive forward P/E ratio of 10.9. With an improving economy in the UK and the impact of synergies from its recent merger, earnings is set to recover in the following year.
Countrywide
Higher property values and rising property transactions should benefit Countrywide (LSE: CWD), the UK’s largest estate agency chain. Countrywide trades at a forward P/E of 14.0, as analysts expect earnings will grow by 10% this year.
As a service-based business, Countrywide is highly cash generative. Recently, the company has used the cash inflows on many bolt-on acquisitions; but in the longer term, the company is in a strong position to raise its dividends. Its shares currently have a forward dividend yield of 4.3%.
Paypoint
Paypoint (LSE: PAY), the consumer payments system, increasingly resembles the innovation of yesteryear. Transactions have increasingly moved online, with especially fast growth in mobile payments.
But whilst the company seeks to gain a foothold in the market for online and mobile payments; its existing business continues to perform strongly, with EPS growing 9.1% to 57.4 pence in 2014/5.
Analysts are also confident with Paypoint’s earnings outlook, with expectations that EPS will grow by 5% in 2015, and 8% in the following year. Its forward P/E of 16.5 may seem unappealing, but Paypoint does have a forward dividend yield is 4.7%.
Telecom Plus
Telecom Plus (LSE: TEP) is benefiting from the shift of consumers from large suppliers to smaller players in the utilities market. The company saw its customer base rise 208,000 to 2.1 million, with adjusted EPS rising 9.3% to 53 pence in 2014.
What’s more, the business is highly cash generative, and has very little capital spending needs. This allows Telecom Plus to be very generous with its dividend policy. It’s forward dividend yield is 4.8%, and it has forward P/E of 16.7.
