Last week's falls dragged the share prices of many companies lower. The falls also dragged down the trailing 12-month performance of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) – the index is now up just 6.3% over the past year.
It's a far cry from December 2013 when investors were celebrating gains of around 15% over the calendar year!
While it's natural for investors to focus on the near term market gyrations, a more beneficial and profitable pursuit can be to take a longer term perspective…
Over the last year certain high quality companies have significantly underperformed the Index and these stocks, while they could get cheaper if the present market volatility continues, could be set to provide improved returns to shareholders in the future.
Wesfarmers Ltd (ASX: WES) has gained just 1.9% over the year. According to Morningstar, consensus earnings for the group are 223.2 cents per share (cps) in FY 2015 and a total dividend of 208.5 cps. Based on this forecast the stock trades on a price-to-earnings (PE) ratio of 19 and a fully franked dividend yield of 4.9%. While this looks a pretty lofty price to me, investors who are bullish on Wesfarmers' growth profile and expect the coal business to rebound may well find the current pricing enticing.
Flight Centre Travel Group Ltd (ASX: FLT) has fallen 3.6% in the last year. Consensus forecasts are for earnings per share (EPS) in FY 2015 of 292.6 cps and dividends of 166.9 cps. This implies a PE ratio of 15.2 and a fully franked yield of 3.7% which looks mighty compelling given the quality of the company and if you believe the outlook for bricks-and-mortar travel agents remains robust.
Coca-Cola Amatil Ltd (ASX: CCL) share price is down 26.3% over the prior 12-months. Consensus EPS is forecast at 54.5 cps in FY 2015 with a dividend of 46.5 cps expected. Based on the current share price this implies a PE ratio and partially-franked dividend yield of 17.3 and 4.9% respectively. Earnings downgrades have led investors to doubt the growth outlook for CCA and this has caused the share price to be marked down. For investors who believe the long-term future of the group is brighter than the recent past, now could be an opportune time to acquire stock.
