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 easyJet (EZJ 0.40%) (ESYJY 2.78%) to determine whether you should consider buying the shares at 1,100 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-Year EPS Growth |
Projected P/E |
PEG |
Yield |
3-Year Dividend Growth |
Dividend Cover |
|---|---|---|---|---|---|---|---|
|
easyJet |
1,100 |
101% |
14 |
0.5 |
2.1% |
N/A |
5.1 |
The consensus analyst estimate for this year's earnings per share is 78.5 pence (27% growth) and dividend per share is 24.9 pence (108% growth).
Firstly, I should mention the consensus analyst estimate for this year's 24.9 pence per share dividend does not include any potential special dividends the company may declare. You see, since announcing its first dividend in 2011, easyJet has stated that it will pay a special dividend, alongside ordinary dividends, every year depending on the company's performance.
That said, after evaluating City forecasts, I believe the budget airline may well pay an additional special dividend this year of around 35 pence per share, indicating that the company could offer a full-year payout of 60 pence a share.
Anyway, trading on a projected P/E of 13.2, easyJet appears cheaper than its peers in the Travel & Leisure sector, which are currently trading on an average P/E of around 19.3.
In addition, easyJet's P/E and double-digit growth rate give a PEG ratio of around 0.5, which implies the share is cheap in relation to the near-term earnings growth the firm is expected to produce.
Could now be the time to buy easyJet?
Shares in easyJet have taken off during the past year, rising around 127% compared to a gain of 11% for the FTSE 100. Yet even after this good performance, I still believe the company is undervalued.
You see, as I have written in the table above, easyJet has doubled its earnings during the past three years and many City analysts forecast the company will continue its rapid growth this year.
In fact, it appears the airline is on target to achieve these forecasts as, within its recent trading update, easyJet told investors that revenue per seat was up 8.5% during the first half of the year. Furthermore, the company announced that it had managed to slash its seasonal first-half loss from £112 million in 2012, to around £63 million for 2013, supporting the argument that the company is in line to meet its impressive growth targets.
So overall, based on the company's rapid earnings growth and the possibility of additional cash returns to shareholders, I believe now looks to be a good time to buy easyJet at 1,100 pence.
More FTSE opportunities
As well as easyJet, 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.
