Is Now the Time to Buy Reed Elsevier?

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 Reed Elsevier  (LSE: REL  ) (NYSE: RUK  ) to determine whether you should consider buying the shares at 734 pence.

I am assessing each company on several ratios:

Price-to-earnings  ratio: Does the share look good value when compared against its competitors?

Price/earnings to growth: 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:

Price

3-Year EPS Growth

Projected P/E

PEG

Yield

3-Year Dividend Growth

Dividend Cover

734 pence

15%

13.8

1.4

3.1%

13%

2.1

The consensus analyst estimate for next year's earnings per share is 53.2 pence (10% growth) and dividend per share is 24.7 pence (7% growth).

Trading on a projected P/E of 13.8, Reed Elsevier appears cheaper than its peers in the media sector, which are currently trading on an average P/E of around 18.

Reed Elsevier's P/E and double-digit growth rate give a PEG ratio of around 1.4, which implies the share price is slightly expensive for the near-term earnings growth the company is expected to produce.

Reed Elsevier offers a 3.1% dividend yield, about the same as the media sector average. Additionally, Reed Elsevier has a three-year compounded dividend growth rate of 13%, implying the yield will continue to stay in-line with that of its peers.

Moreover, the dividend is slightly more than two times covered by earnings, giving Reed Elsevier plenty room for further payout growth.

So, is now the time to buy Reed Elsevier?
Earnings growth at Anglo-Dutch publisher Reed Elsevier has been slow over the past few years, as the company has suffered from the decline in the tradition publishing market.

However, the company's management has been proactive during this period, focusing on adjusting the company's business portfolio away from traditional publishing, into a provider of professional information solutions and events management, such as data analysis and exhibitions.

Indeed, it would appear that this transition is going well; the company recently reported that around 80% of revenues now come from the sales of electronic publications and exhibitions.

Moreover, this strategic change has boosted profit margins. In particular, while the company's revenues have only grown 1.4% during the last three years, profits have rallied 67%.

Having said that, risks still remain for the group -- the majority of the company's customers are businesses, whom continue to cut spending as the macroeconomic environment remains uncertain.

Furthermore, Reed's management has stated that 2013 will be a poor year for the company's events division and revenues for the division are expected to fall by 5%-6%.

So, after taking all of that into account and factoring in the company's current discount to sector peers and near-term growth rate, I believe now looks to be a good time to buy Reed Elsevier at 734 pence.

More FTSE opportunities
As well as Reed Elsevier, I am also positive on the five FTSE shares highlighted within this this exclusive wealth report.

Indeed, all five opportunities offer a mix of robust prospects, illustrious histories and dependable dividends, and have just been declared by the Fool as "5 Shares You Can Retire On"!

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


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