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Should you buy Fortescue Metals Group Limited, Ramsay Health Care Limited and Westpac Banking Corp?


Fortescue Metals Group Limited

Shares in Fortescue Metals Group Limited (ASX: FMG) have rallied in recent days as the company offered a rare piece of good news for investors in its quarterly update. Indeed, falling oil prices and a weaker Aussie dollar have reduced the company’s production cost guidance, with a continued focus on operational efficiencies also having a positive impact, too.

Furthermore, Fortescue believes that it will avoid the wave of impairment charges that are affecting many of its rivals, with its review at the end of December confirming that the current book values of assets are recoverable. This is excellent news for investors and shows that, while a weak iron ore price remains a concern, Fortescue continues to perform relatively well. And, with Fortescue having a price to earnings (P/E) ratio of just 9, it seems to be a relatively appealing stock that could be worth buying at the present time.

Ramsay Health Care Limited

With the Aussie economy going through a tough patch, it’s of little surprise that many investors are seeking out stocks that have a history of strong earnings growth. One such stock is Ramsay Health Care Limited (ASX: RHC) and, over the last 10 years, it has managed to post earnings growth of 20.9% per annum. That’s a staggering rate of growth and, best of all, it is less dependent upon the economy for future growth than most companies are, which makes it a relatively defensive play, too.

And, although it currently trades on a valuation that is very generous, with it having a price to book (P/B) ratio of 7.1 (versus a sector average of 2.8) for example, it would be of little surprise for investors to bid up Ramsay’s share price even further – especially if the economic outlook worsens in the months ahead.

Westpac Banking Corp

Management reporting changes have formed a key part of the first few days for the new CEO of Westpac Banking Corp (ASX: WBC), Brian Hartzer. As well as the chiefs of Westpac’s various subsidiaries now reporting directly to him, Mr Hartzer has stated that technology will play a more important role in the bank’s future offering and growth. This seems to be a sound strategy and one that could deliver strong growth for the bank moving forward.

Of course, Westpac has been relatively successful in the past, with it having increased cash flow at an annualised rate of 15.8% over the last 10 years. This shows that the bank can be relatively reliable even during a difficult period as was experienced in the global financial crisis.

And, looking ahead, Westpac’s P/E ratio of 14 seems to be a fair price to pay when you take into account its recent financial performance and also the fact that the wider banking sector trades on a P/E ratio of 14.6. As a result, now could be a good time to buy a slice of Westpac.

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

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