How Lloyds Banking Group PLC (ADR) (LYG) Measures Up As a GARP Investment

Page 1 of 2

LONDON – A popular way to dig out reasonably priced stocks with robust growth potential is through the “Growth At A Reasonable Price,” or GARP, strategy. This theory uses the price-to-earnings to growth (PEG) ratio to show how a share’s price weighs up in relation to its near-term growth prospects — a reading below 1 is generally considered decent value for money.

Today I am looking at Lloyds Banking Group PLC (ADR) (NYSE:LYG) to see how it measures up.

What are Lloyds Banking Group’s earnings expected to do?

2013 2014
EPS Growth n/a 32%
P/E Ratio 13.9 10.5
PEG Ratio n/a 0.3

Source: Digital Look.

City analysts expect Lloyds Banking Group PLC (ADR) (NYSE:LYG)
to rebound in the current year from losses per share of 2 pence in 2012, with earnings per share (EPS) of 4.5 pence pencilled in for 2013. This is then expected to advance to 5.9 pence next year.

Lloyds Banking Group PLC (ADR) (NYSE:LYG)

Mathematical problems do not provide 2013′s projected turnaround with valid EPS growth or PEG ratings, although next year’s EPS turnaround illustrates the decent growth potential on offer. Still, next year’s PEG multiple comes in below the marker of 1, which represents good value.

And although Lloyds Banking Group PLC (ADR) (NYSE:LYG) comes in comfortably above a price-to-earnings (P/E) ratio reading of 10 for this year — a reading under this level is usually classified as exceptional value for money — it is anticipated to fall much closer to the benchmark in 2014.

Does Lloyds Banking Group provide decent value against its rivals?

FTSE 100 Banks
Prospective P/E Ratio 14.8 41.3
Prospective PEG Ratio 4.5 0.9

Source: Digital Look.

Unlike Lloyds Banking Group PLC (ADR) (NYSE:LYG), the FTSE 100 and banking sectors both produce valid PEG ratings for the current year. Still, Lloyds’ superior forward P/E rating shows the decent value on offer compared with its counterparts.

After a prolonged slog and severe transformation measures, I believe that Lloyds Banking Group PLC (ADR) (NYSE:LYG) has emerged from the 2008-2009 financial crisis and subsequent government bailout in excellent shape. And I expect a more streamlined company to punch strong revenues and earnings growth moving forwards.

Customisable conclusion
A huge reduction in impairment charges, combined with massive cost-cutting measures and asset sales, have led to a vast improvement in the part-nationalized bank’s financial performance in recent times. Indeed, Lloyds Banking Group PLC (ADR) (NYSE:LYG) announced in April that pre-tax profit had leapt to £2 billion in the first quarter versus £280 million in the same period last year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!