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 Standard Chartered (STAN 0.82%) (SCBF.F 1.12%) to determine whether you should consider buying the shares at 1,635 pence.
I am assessing each company on several ratios:
Price-to-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 |
|---|---|---|---|---|---|---|---|
| Standard Chartered | 1,635p | 16% | 10.1 | 1.7 | 3.5% | 22% | 2.8 |
The consensus analyst estimate for next year's earnings per share is $2.4 (6% growth) and dividend per share is $0.93 (11% growth).
Trading on a projected P/E of 10.1, Standard Chartered appears much cheaper than its peers in the banks sector, which are currently trading on an average P/E of around 30.
Standard Chartered's P/E and mid-single-digit growth rate give a PEG ratio of around 1.7, which implies the share price is expensive for the near-term earnings growth the firm is expected to produce.
Offering a 3.5% yield, the dividend is about the same as the sector average. However, Standard Chartered has a three-year compounded dividend growth rate of 22%, implying the yield could soon overtake that of its peers.
Indeed, the dividend is just under three times covered, giving Standard Chartered plenty room for further payout growth.
So, now the time to buy Standard Chartered?
As I have written above, Standard Chartered is currently trading at a discount to its peers in the banks sector; however, I believe that the company does not deserve this low valuation.
You see, while the majority of Standard Chartered's peers have been struggling to return to profitability after the credit crisis in 2008, Standard Chartered recently announced that 2012 was its 12th consecutive year of earnings growth -- a record that almost none of its peers can beat.
Furthermore, many City analysts believe that the company's earnings will continue to grow 6% this year, and 10% in 2014.
It appears that the reason for the banks success is the rapid growth in developing markets over the past few years, in particular, Asia, Africa, and the Middle East, where Standard Chartered generates around 90% of its income.
Moreover, the bank has plenty of room for further growth, as the International Monetary Fund predicts that economic expansion within Asia, Africa,and the Middle East, will average 5%-8% a year for the next 10 years.
Overall, based on Standard Chartered's future prospects and current discount to sector peers, I feel now looks to be a good time to buy Standard Chartered at 1,635 pence.
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In the meantime, please stay tuned for my next verdict on a FTSE 100 share.
