LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.
So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.
Today I am looking at CRH PLC (UK) (LON:CRH) to determine whether you should consider buying the shares at 1,514 pence.
I am assessing each company on several ratios:
Price/earnings (P/E): Does the share look good value when compared against its competitors?
Price/earnings-to-growth (PEG): Does the share look good value factoring in predicted growth?
Yield: Does the share provide a solid income for investors?
Dividend cover: Is the dividend sustainable?
Let’s look at the numbers
|Stock||Price||3-Year EPS Growth||Projected P/E||PEG||Yield||3-Year Dividend Growth||Dividend Cover|
The consensus analyst estimate for this year’s earnings per share is 0.88 euros (up 18%), and dividend per share is 0.65 euros (unchanged).
Trading on a projected P/E of 21.6, CRH PLC (UK) (LON:CRH) appears to be valued at about half the level of its peers in the Construction and Materials sector, which are currently trading on an average P/E of around 41.
CRH’s P/E and high double-digit growth rate give a PEG ratio of around 1.2, which implies that the share is fairly priced for the near-term earnings growth the company is expected to produce.
Offering a 3.6% yield, CRH’s dividend income is about the same as the sector average. However, CRH’s dividend payout has not grown over the past three years, implying that the yield could soon start to fall behind that of its competitors.
In addition, the dividend is just under one and a half times covered by earnings and therefore does not suggest there will be much room for further payout growth.
CRH is trading at a discount to its peers, but is the company too expensive?
As I say, CRH’s shares are trading at a discount to the company’s peers. However, I believe that CRH PLC (UK) (LON:CRH) is currently too expensive.
CRH PLC (UK) (LON:CRH) is an international supplier of building materials and therefore is more exposed than most to the fragile economic environment. Indeed, within CRH PLC (UK) (LON:CRH)’s full-year results released in February, the company announced profits for 2012 had fallen 5%. In particular, CRH PLC (UK) (LON:CRH) reported that its European division had suffered a 40% profit fall.