Aggreko plc (LON:AGK)
Investors should hold off on Aggreko — which rents out power and temperature-control equipment across more than 30 countries — at least in the short term, as demand from the company’s key markets remains unpredictable.
The company is in prime position to benefit over a longer time horizon from a growing global population, increasing urbanisation and greater economic growth, particularly in developing countries where it continues to expand.
In the meantime, however, earnings growth could come under increasing pressure. Aggreko warned in December of an uncertain outlook for 2013, adding that its performance was likely to drop from 2012 levels.
City experts expect 2012 earnings per share — results for which are scheduled for 7 March — to rise 16%. However, for 2013 growth is expected to dip 6% before rebounding 10% higher in 2014.
These patchy near-term fundamentals do not justify the company’s premium rating in my opinion. A P/E reading of 17.2 for 2012 is expected to rise to 18.3 in 2013 before dropping to 16.6 next year.
Associated British Foods plc (LON:ABF)
I reckon that Associated British Foods is on course to surge skywards as takings at its Primark budget clothing chain remain on course to tread higher, helped by enduring challenges in the U.K. retail environment.
ABF announced in January that turnover at the chain jumped 25% during the 16 weeks to Jan. 5, which helped drive group revenues 10% higher. Healthy like-for-like sales, extra retail space and greater sales within new stores have all boosted the chain’s sterling performance.
Analysts expect ABF’s earnings per share to rise 10% in both 2013 and 2014, while new shop openings from 2014 onwards should propel group turnover higher over the longer term.
ABF carries a weighty P/E ratio, which is expected to come in at 19.5 and 17.7 for the next two years. But I believe the possibility of exciting earnings growth, propelled by soaring expansion at Primark, fully justifies this premium rating.
Zone in on other sterling stocks
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The article Should You Buy These 5 FTSE 100 Shares? 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 Associated British Foods.
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