Shares in house builder Taylor Wimpey (LSE: TW) were given a boost today after the company released an upbeat trading update. It states that against the backdrop of a positive UK housing market, Taylor Wimpey has been able to increase home completions by 7% to 13,341, with the average selling price on private completions increasing by 9% to £254,000.
The latter has benefitted from the company’s focus on better quality locations and with Taylor Wimpey having a record year-end order book, it appears to be well-positioned to post further gains in 2016.
Encouragingly, Taylor Wimpey has also delivered a record operating margin with it now standing at 20%. This, plus an improved outlook for the company’s Spanish division, means that Taylor Wimpey’s outlook is very positive.
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In fact, its bottom line is forecast to rise by 15% in the current year. This puts the company’s shares on a price-to-earnings growth (PEG) ratio of only 0.8, which indicates that strong gains could lie ahead for the company’s investors, with a dividend yield of 5.7% highlighting Taylor Wimpey’s income appeal too.
High yields
Also offering a top-notch outlook for income-seeking investors is AstraZeneca (LSE: AZN). Despite a challenging period that has seen its bottom line come under considerable pressure as a result of the loss of patent protection on numerous key drugs, AstraZeneca has maintained dividend payouts over the last five years. And with it currently yielding 4.3%, it offers a higher yield than the wider index at the present time.
Looking ahead, AstraZeneca has significant total return potential. As well as a strong yield, it’s expected to return to positive profit growth in the coming years as its vast acquisition strategy begins to bear fruit. On this front, AstraZeneca has more potential in 2016 and beyond since its cash flow and balance sheet appear able to accommodate substantially more debt. That means it can make further purchases in order to enhance the company’s drug pipeline.
This, alongside a price-to-earnings (P/E) ratio of just 16.3, indicates that now could be an opportune moment to buy a slice of AstraZeneca ahead of improved performance in 2016 and beyond.
China syndrome?
Meanwhile, 2016 has got off to a poor start for luxury fashion brand Burberry (LSE: BRBY). Its shares have been affected by fears surrounding China’s long-term growth rate since the world’s second-largest economy remains a key growth region for Burberry. Therefore, further turbulence in the Chinese stock market could cause a further deterioration in Burberry’s share price after its 7% decline since the turn of the year.
But in the longer term, Burberry has huge growth potential. That’s because it continues to enjoy a relatively wide economic moat as a result of a high degree of customer loyalty. And with a diverse geographical spread, its reliance on China for long-term growth may not be as strong as is currently perceived by the market. Therefore, Burberry may be able to command a higher rating than its current P/E ratio of 14.3 – especially since it’s forecast to return to positive profit growth in the next financial year.
