Today I am looking at the investment potential of two FTSE-quoted stars.
Flooring it
Furnishings play United Carpets (LSE: UCG) greeted the market with a positive trading update in end-of-week trading, a development that sent shares 2% higher from Thursday’s close.
The Rotherham-based business advised that revenues advanced 11% between April and September, with like-for-likes rising 5% higher despite tough comparatives. Consequently United Carpets saw pre-tax profit lunge 10.1% higher, to £588,000.
Following the results, chief executive Paul Eyre commented that “with consumer confidence and the housing sector showing signs of a generally improving trend, the board is confident in the long term prospects for the group.”
United Carpets has been a solid performer during the course of 2015, the upholsterer’s stock price adding 30% since the turn of the year. But it could be argued the business still offers plenty of upside for value hunters.
An expected 4% earnings decline in the year to March 2016 results in a P/E rating of just 8.8 times — a multiple around or below 10 times is widely considered unmissable value. And this reading falls to just 8.2 times for 2017 thanks to predictions of an 8% bottom-line advance.
On top of this, United Carpets is predicted to raise last year’s dividend of 0.25p per share to 0.4p in both 2016 and 2017, producing a meaty yield of 3.5%. Given that strong retail conditions should keep sales momentum at United Carpets chugging along nicely, I reckon the flooring play could present a very canny purchase at current prices.
A financial favourite
Like United Carpets, it could be argued that banking behemoth Barclays (LSE: BARC) also provides terrific bang for one’s buck.
Uncertainty continues to swirl around the shape and direction of the bank following the recent appointment of new chief executive Jes Staley. This week the business offloaded its Barclays Risk Analytics and Index Solutions division to Bloomberg for £520m, boosting its CET1 capital ratio by 10 basis points and keeping its streamlining operations trucking.
But reports also emerged this week that Staley is preparing to put some or all of Barclays’ African assets on the chopping block. The Financial Times reported that much of the firm’s retail operations could be shorn off, although some of the bank’s corporate and investment banking operations could also be retained. Any reshaping of the firm’s emerging market footprint could have a drastic effect on Barclays’ long-term growth potential.
Regardless, I believe Barclays still remains a strong stock candidate — the strong UK economy should keep revenues bubbling over, while the company’s Transform cost-cutting scheme continues to reduce capital seepage.
Consequently the City expects Barclays to punch earnings rises of 24% and 21% in 2015 and 2016 respectively, resulting in delicious P/E ratings of 10.6 times and 8.6 times.
With profits predicted to take off, and the firm’s capital base steadily improving, Barclays is also anticipated to give its dividend policy a strong shot in the arm. A reward of 6.5p per share in recent years is expected to nudge to 6.6p in 2015, yielding 2.9%. And this reading rises to a chunky 3.6% for next year thanks to predictions of an 8.3p dividend.