LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market. However, many people are currently worried the market could be overheating.
So, right now, I'm analyzing some of the most popular companies in the FTSE 100, hoping to establish if they can continue to outperform in today's uncertain economy.
Today I'm looking at the country's third largest supermarket, J. Sainsbury (SBRY -1.60%) (JSAI.Y 0.15%), to determine whether the shares are still safe to buy at 366 pence.
So, how's business going?
Over the last year or so, investors have been drawn to Sainsbury's as the company delivers quarter after quarter of impressive progress for its shareholders.
Indeed, during 2012, Sainsbury's sales grew 4.6% at a time when the company's closest competitors, Tesco and Morrisons, managed sales growth of only 1.3% and 0.6%, respectively.
In addition, Sainsbury's reported that, thanks to its rapid sales growth, the chain now held a 16.8% share of the market -- the firm's highest market share in a decade.
However, while Sainsbury's has achieved show-stopping growth over the last few years, it appears that many City analysts are now cautious about the firm's future. In particular, these analysts are worried that increasing competition in the sector could slow, or even stall, the company's growth story.
Expected growth
Unfortunately, while the company's sales continue to grow, many City analysts expect the firm's earnings growth to be sluggish in comparison during the next two years. City forecasts currently predict earnings of 31.3 pence per share for this year (growth of 3%), and 33.5 pence for 2014.
Shareholder returns
Sainsbury's dividend yield is currently 4.5% -- larger than that of its peers in the food retailers sector, which currently offer an average dividend yield of just under 4%. Furthermore, it appears that the company's yield will continue to stay above that of its peers, as the firm's managers have stated that they are committed to raising the dividend annually, while aiming to keep the payout covered at least twice by earnings.
Valuation
As Sainsbury's has been growing faster than its peers, investors have been prepared to pay more for the company's shares, and Sainsbury's currently trades at a premium to its sector peers.
Sainsbury's currently trades at a historic P/E of 11.8, while its peers trade on an average historic P/E of around 10.5.
Foolish summary
Despite worries about growing competition in the sector, it appears that Sainsbury's deserves its current premium. Additionally, the firm offers investors a dividend income above that of its peers and the majority of the wider market.
Overall, I believe that Sainsbury's still looks safe to buy at 366 pence
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In the meantime, please stay tuned for my next FTSE 100 verdict.
