Is Now the Time to Buy Smiths Group?

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 Smiths Group  (LSE: SMIN  ) (NASDAQOTH: SMGZY) to determine whether you should consider buying the shares at 1,212 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

Smiths Group

1,212p

9.5%

12.8

4.3

3.2%

12%

2.4

The consensus analyst estimate for next year's earnings per share is 95 pence (3% growth) and dividend per share is 40 pence (5% growth).

Trading on a projected P/E of 12.8, Smiths appears to be significantly cheaper than its peers in the general industrials sector, which are currently trading on an average P/E of around 19.3.

Smiths' P/E and low single-digit growth rate give a PEG ratio of around 4.3, which implies the share price is extremely expensive for the near-term earnings growth the firm is expected to produce.

Offering a 3.2% yield, the dividend is only slightly less than the sector average of 3.4%. That said, Smiths has a three-year compounded dividend growth rate of 12%, implying the yield could soon catch up to that of the wider sector.

What's more, the dividend is about two-and-a-half times covered by earnings, giving Smiths plenty room for further payout growth.

Smiths is currently trading at a significant discount to peers, is now the time to buy?
Smiths manufacturers a wide range of specialized equipment, including airport scanners, medical devices and communications equipment.

The company has had a tough time over the past few years as its customers have remained cautious and delayed orders due to the uncertain economic environment.

That said, the company appears to be making a comeback and, within its half-yearly report for 2012/3, the firm announced that its underlying revenues had grown 6% and pre-tax profit had advanced at a similar rate.

Furthermore, the company experienced growth across all of its divisions for the period. In particular, profits at Smiths Detection, which produces equipment used for the detection of terrorist devices, grew a staggering 56% during the period.

In addition, the company's sales to emerging markets grew 9% and now represent 15% of overall group revenues.

Overall, despite Smiths slow historic growth, the company has made a good start to 2013. Additionally, Smiths is currently trading at a significant discount to its peers in the sector. As such, I believe now looks to be a good time to buy Smiths Group at 1,212 pence.

More FTSE opportunities
As well as Smiths Group, 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"!

Just click here to read the report -- it's free.

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

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