Direct Line Insurance
Although not a member of the FTSE 100 index, Direct Line Insurance Group PLC (LON:DLG) offers investors the opportunity to latch onto heavyweight earnings increases in coming years.
The firm — which listed on the London Stock Exchange in October after Royal Bank of Scotland spun off a sizable chunk of the insurer’s entity — saw operating profit from continuing operations jump 9.3% to 461.2 million pounds in 2012. Direct Line is a huge player across a myriad of insurance subsectors, which I believe should deliver solid growth.
City experts have penciled in an EPS decline of 12% for 2013 to 19 pence, although a strong rebound is expected in the following 12 months: Growth of 27% to 24 pence is expected next year. And the insurer also offers chunky payouts to stakeholders, with last year’s full-year payout of 8 pence expected to rise to 12.8 pence and 14.4 pence per share, respectively, in 2013 and 2014. Dividend yields for these years come in well ahead of the FTSE 100 forward average, at 6.2% and 6.9%.
Direct Line Insurance Group PLC (LON:DLG) trades on a P/E rating of 10.6 for 2013, which dips well into bargain-basement territory of 8.4 for 2014, providing greatly improving value for money when viewed against a forward earnings multiple of 10.1 for the wider non-life-insurance sector.
Shire
I reckon shares in pharma play Shire PLC (LON:SHP) are ready to shoot higher as a combination of accelerating research and development and acquisitions helps propel growth over the medium to long term. Shire PLC (LON:SHP) raised R&D spending 16% last year to $848.8 million, which should turbocharge its product pipeline and deliver stellar sales increases well into the future. Goldman Sachs expects turnover to rise around 10% a year until 2017, compared to a 3% rise across the entire pharma sector.
As well, I fully expect the firm’s substantial $1.4 billion cash pile to drive M&A activity during the coming years. The company purchased SARCode Bioscience of the U.S. and Premacure AB of Sweden in recent months to bolster its ophthalmology activities, for example.
Earnings per share are expected to explode 68% this year to 147 pence, with growth of 14% marked up for 2014 to 168 pence.
The company was recently changing hands on respective P/E ratios of 13.4 and 11.7 for 2013 and 2014, representing a gargantuan value gap from an average forward earnings multiple of 41.5 for the wider pharmaceuticals and biotechnology sector. Indeed, Shire PLC (LON:SHP)’s position as a great value stock is underlined by a PEG readout of 0.2 for this year and 0.8 for next.
The article Are These FTSE 100 Shares a Buy? originally appeared on Fool.com and is written by Royston Wild.
Fool contributor Royston Wild has no position in any stocks mentioned. The Motley Fool recommends Burberry Group.
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