Is Now the Time to Buy Aberdeen Asset Management?

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 Aberdeen Asset Management  (LSE: ADN  )  to determine whether you should consider buying the shares at 432 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 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?

So, let's look at the numbers:

Stock Price 3-Yr. EPS Growth Projected P/E PEG Yield 3-Yr. Dividend Growth Dividend Cover
Aberdeen Asset Management 432p 74% 16 0.8 2.7% 64% 2

The consensus analyst estimate for next year's earnings per share is 27 pence (19% growth) and dividend per share is 13.7 pence (19% growth).

Trading on a projected P/E of 16, Aberdeen appears to be much cheaper than its peers in the financial services sector, which are currently trading on an average P/E of around 20.2.

Furthermore, Aberdeen's P/E and high double-digit growth rate give a PEG ratio of around 0.8, which implies that the share is cheap for the near-term earnings growth the firm is expected to produce.

At 2.7%, Aberdeen's dividend income is below the sector average of 3.5%. However, Aberdeen has a three-year compounded dividend growth rate of 64%, implying that the yield could soon overtake that of its peers.

Indeed, the dividend is approximately two times covered by earnings, giving Aberdeen plenty of room for further payout growth.

Aberdeen's earnings are forecast to grow rapidly this year; is now the time to buy?
Aberdeen is a global asset management company and fund manager. Indeed, Aberdeen is one of the largest asset management companies in the world with just over 193 billion pounds in assets under management.

As one of the world's largest asset management companies, Aberdeen seems in prime position to benefit from the record amount of money currently flowing into stock markets around the globe. Indeed, during the last quarter of 2012, the company reported record quarterly inflows of 1.1 billion pounds into its products.

Nonetheless, Aberdeen's management continues to remain cautious about the global economic environment and equity markets. In particular, Aberdeen's management is seeking to reduce interest in the company's very popular emerging-market funds, as management believes that if the current level of demand continues, fund performance could be affected.

Furthermore, due to Aberdeen's exposure to global stock markets, any significant fall in market values could affect the company's near-term earnings outlook. In addition, the company is highly reliant on its fund-management performance to draw in clients and any departure could lead to an outflow of assets.

That said, Aberdeen is currently experiencing record demand for its products and the firm currently looks cheap compared to its peers and near-term earnings growth. So overall, I believe now looks to be a good time to buy Aberdeen Asset Management at 432 pence.

More FTSE opportunities
As well as Aberdeen, I am also positive on the FTSE 100 share highlighted within this exclusive free report.

You see, the blue chip in question offers a 5.7% income, its shares might be worth 850 pence compared to about 700 pence now -- and it has just been declared "The Motley Fool's Top Income Stock for 2013"!

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In the meantime, please stay tuned for my next verdict on a FTSE 100 share.


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10/21/2014 11:48 AM
ADN $408.25 Up +2.45 +0.60%
Aberdeen Asset Man… CAPS Rating: No stars

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