Barclays
Barclays (LSE: BARC) (NYSE: BARC.US) will report its interim results on 30 July. If the company can inspire market confidence in current full year forecasts, the shares could begin a significant rally.
On the consensus of market forecasts, Barclays shares are cheap.
Analysts expect that the bank will report earnings per share (EPS) of 36.4p this year, rising to 43.4p in 2014. That’s a 2014 price-to-earnings (P/E) ratio of just 7. It is extremely rare to find a growing company trading on such a low rating.
The dividend yield looks a little light at 2.4% forecast for this year. However, the payout is more than five times covered, suggesting that there is plenty of room for some big rises.
Royal Bank of Scotland
Shares in Royal Bank of Scotland (LSE: RBS) (NYSE: RBS.US) fared well last week, rising 10%. By comparison, the FTSE 100 only managed a 2.7% improvement. This encapsulates my point: when the market does well, RBS shares can soar.
Whatever the market does, I expect RBS shares to rise significantly. That’s because I calculate that the shares are materially undervalued. At the end of the first quarter, RBS reported a 3% increase in net tangible asset value to 459p per share. It is rare that shares in profitable companies trade below their asset value. RBS shares are today available at 310p — yet the bank is expected to make a profit both this year and next.
RBS shares are available on a 2014 P/E of just 9.5 times forecasts.
Antofagasta
Like the rest of the industrial metal miners, Antofagasta (LSE: ANTO) shares are a play on the market price of the resource being exploited. In Antofagasta’s case, it is primarily copper.
The trouble is, in the last six months, the price of copper is down 16%. That has led analysts to reduce their expectations for Antofagasta profits by 33%. As a result, the shares have fallen 36% in that time.
With a forecast dividend of just $0.36, there is not a large yield to protect investors from further share price falls.
Using today’s forecasts, Antofagasta trades on a 2013 P/E of 12.8, with a prospective dividend yield of 2.8%. There is better value elsewhere in the sector.
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> David owns shares in Barclays and RBS but none of the other companies mentioned.