Are Any of These 5 FTSE 100 Shares a Buy?

LONDON -- I have recently been evaluating the investment cases for a multitude of FTSE 100 companies.

Although Britain's foremost share index has risen 7.7% so far in 2013, I believe many London-listed stocks still have much further to run, while conversely others seem overdue for a correction. So how do the following five stocks weigh up?

IMI
I believe IMI  (LSE: IMI  ) should continue to punch fresh record highs -- the shares of the engineering specialist hit a new peak above 1,230 pence last week -- as its niche product offerings in specialist growth markets should uphold long-term strength.

The company has shown excellent resilience despite the subdued global economy, revealing in November's interims that revenues during the initial ten months of the year were 6% ahead of the corresponding 2011 period.

City analysts expect earnings per share to rise just 1% in 2012 -- results for last year are due on Thursday, 7 March -- but to accelerate thereafter. A 5% increase is anticipated this year before doubling to 10% in 2014.

IMI trades at a premium, with a P/E ratio of 14.9 for last year expected to remain elevated at 14.2 and 12.9 in 2013 and 2014 respectively. But I believe the security associated with the company's quality product range and excellent aftermarket revenues warrants a higher rating.

Severn Trent
I think investors should hold off on taking the plunge with Severn Trent  (LSE: SVT  ) , at least while the uncertainty surrounding next year's water industry regulatory review continues to threaten the share price.

This utilities play is popular among income investors owing to the potential for plump dividends -- a payout yield of 4.5% in 2012 is forecast to rise to 4.7% for the year ending March 2013 before marching to 5% in 2014.

However, these payments are not well covered, with a readout of 1.2 expected by City analysts in both 2013 and 2014. Dividend cover below 2 is generally considered risky. And mediocre medium-term growth prospects -- earnings per share are expected to rise just 4% and 3% this year and next -- could put projected dividends under pressure.

Ofwat is scheduled to unveil a raft of changes to water industry regulations in 2014 that determine the pricing for the 2015-2020 period. The impact of rising utilities bills on households could result in a harsh ruling for the water companies, possibly squeezing earnings over the longer term.

Johnson Matthey
I believe that, over the long term, diversified chemicals play Johnson Matthey  (LSE: JMAT  ) is well positioned to profit from rising precious-metal prices, increasing scrap-metal levels and rising demand for catalytic converters.

But I feel investors should hold off the shares for the time being, as enduring weakness in key cyclical end markets is casting a pall over current earnings prospects.

Excluding precious-metals sales, revenue fell 2% in the third quarter, which in turn pushed underlying profit 19% lower. And current weakness in the European car and truck markets are expected to keep dragging on the firm's critical Emission Control Technologies arm.

City analysts forecast earnings per share to decline 6% during the year ending March 2013. Profits are then expected to modestly bounce back in 2014 and 2015, however, by 7% and 9% respectively.

However, in my opinion, Johnson Matthey is currently trading at too much of a premium given the current uncertainty over the firm's near-term fortunes. A P/E ratio of 15.7 for the current year is expected to remain high at 14.7 and 13.5 during the following two years.

Rolls-Royce
Engineering leviathan Rolls-Royce  (LSE: RR  ) boasts world-class expertise across many lucrative growth sectors, and I believe that strident progress in the energy, marine and civil aerospace markets should reward investors with continued earnings growth.

Last month the firm reported underlying revenue up 8% to £12.2 billion for 2012, a result that drove underlying pre-tax profit 24% higher to £1.4 billion. In particular, the group's prime position in the commercial airplane market continues to reap huge dividends, and is a sector that should underpin future growth.

Trent engine sales rose 23% during the second half versus the first six months last year, and the group's entire civil aerospace order book rose 5% in 2012 to a healthy £50 billion.

The group's earnings per share are forecast to rise 11% this year, according to broker estimates, and a further 9% in 2014.

Rolls-Royce cannot be considered cheap, however, and the shares currently change hands on a P/E reading of 15.5 and 14.2 for 2013 and 2014 respectively. But I believe the diversity of the group's operations across many red-hot sectors offers both peace of mind in austere times and appetising growth potential.

Fresnillo
I believe investors should give silver miner Fresnillo  (LSE: FRES  ) a wide berth, as the current share price does not reflect the risks associated with the firm's planned production ramp-ups. A choppy silver price could also exert fresh price pressure.

Fresnillo predicts annual production of 41 million ounces this year, flat from 2012 levels. It expects increased output at its Saucito complex to compensate for declining ore grades at its bellwether Fresnillo mine. Further out, the firm expects production of 65 million ounces per year by 2015.

City experts predict last year's mining difficulties caused earnings to dip 13% during 2012, the actual results for which are due on Tuesday, 12 March. But earnings are then expected to grow 12% and 19% in 2013 and 2014 respectively as production accelerates.

Fresnillo trades on a P/E multiple of 21.3 and 17.9 for this year and next. But I think that, despite recent heavy weakness in the share price, the company remains overvalued at current levels. Any mistakes with the timing and quantities of the proposed ramp-ups at its facilities -- a common problem in the mining industry -- could send projected earnings tumbling.

Zone in on other sterling stocks
If you already hold shares in these companies, and are looking for excellent earnings prospects elsewhere, this special report highlights the possible FTSE winners identified by ace fund manager Neil Woodward.

Woodford -- head of U.K. Equities at Invesco Perpetual -- has more than 30 years' experience in the industry, and boasts an exceptional track record when it comes to selecting stock market stars.

The latest report, compiled by The Motley Fool's crack team of analysts, is totally free and comes with no further obligation. Click here now to download your free copy.

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