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4 reasons to buy Bradken Limited

2014 has been largely disappointing thus far for investors in Bradken Limited (ASX: BKN). That’s because shares in the mining and industrial services company have fallen by 19% since the turn of the year, while the ASX is up 5% over the same time period. However, Bradken’s share price performance could be far better going forward. Here are four reasons why.

  1. After its share price fall, Bradken now trades on a highly attractive valuation. For instance, shares in the company currently have a P/E of just 14.7, which is well below the ASX’s P/E of 16.4. Furthermore, their price to book ratio also points to great value for money on both an absolute and relative basis. It currently stands at just 1.1; far less than the ASX’s 1.3.
  2. However, Bradken is much more than just a cheap stock. It has superb growth potential too. For instance, earnings are forecast to increase by a whopping 23.2% over the next two years alone, which is well ahead of the wider index’s expected growth rate. Combining this with the company’s P/E ratio yields a price to earnings growth (PEG) ratio of just 0.6, which highlights that growth is on offer at a very reasonable price.
  3. Bradken should also appeal to income-seeking investors. That’s because it offers a dividend yield of 5.5%, which is ahead of the ASX’s yield of 4.4%. Certainly, it’s slightly disappointing that Bradken’s dividend is not franked, but it still beats most savings accounts on offer while interest rates are at just 2.5%.
  4. If a 5.5% yield isn’t enough, the good news is that Bradken is forecast to increase dividends per share by 11% over the next two years. Of course, this is being largely funded by the previously mentioned strong growth prospects. However, it shows that Bradken should remain a highly relevant and attractive income play over the short to medium term. This, in combination with its strong growth prospects, low valuation and above-average current yield, means that Bradken could be a strong performer moving forward.

Bradken isn't the only promising story worth knowing about! 

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Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.

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