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Kick Off: Computershare Limited v Brambles Limited

Welcome to this ASX World Cup group game between Computershare Limited (ASX: CPU) and Brambles Limited (ASX: BXB). Two top teams all investors should take a close look at.

Pre-match commentary and stats

Financial services business Computershare is up more than 20% over the last year, while pallets and packaging business Brambles’ share price has been up over 11%, compared to the S&P/ASX 200 Index’s (INDEXASX:XJO) 15% rise. Some key stats are given below.

Computershare Brambles
Code ASX:CPU ASX:BXB
Recent Price $12.55 $9.21
Market Capitalisation $6.99 billion $14.13 billion
Dividend Yield / Franking 2.4% | 20% 3.0% | 30%
Projected P/E ratio 2015 17.2 18.6
Price-Book ratio 5.79 4.32

Source: Morningstar / Thomson Consensus Estimates.

Let’s look at the companies fundamentals, Computershare is a dominant player in its field of share registry and transaction services, with more than 70% of its revenue estimated to be recurring, it has steady cash flow and fat profit margins. The sticky client base and size advantage give this team a sustainable competitive advantage over rivals and all this means Computershare scores an early goal!

Packaging and containers business Brambles is another fine team, with global reach, defensive revenue streams and high margins. Like Computershare it has competitive advantages by virtue of its size and market position, a great team worthy of fans’ attention. Its own fundamentals mean it levels the scores at 1-1.

Computershare has a slightly lower estimated forward price-earnings of the two, and a far lower price-earnings to growth (PEG) ratio, value-oriented investors may see an opportunity there, and Computershare strikes again. 2-1 to Computershare on value.

Both teams are hard to separate on dividend yields so let’s look at the all important outlook. With interest rates at record lows in Computershare’s major North American and European markets, any eventual rise in them should greatly benefit Computershare’s bottom line due to income the company earns on funds it holds for clients. Brambles should also benefit from the much anticipated pickup in advanced economies, but probably not to the extent Computershare will. Computershare scores on outlook as well to run out a 3-1 winner.

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Motley Fool contributor Tom Richardson has no financial interest in any company mentioned. The Motley Fool owns shares in Computershare. You can find Tom on Twitter @tommyr345

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