Fortescue Metals Group Limited
Suffice to say, the last year has been a disaster for investors in Fortescue Metals Group Limited (ASX: FMG), with its share price crashing by 58% and showing little sign of life in recent months. Despite this, the company has still been able to increase its bottom line by an incredible 75% in the last year, although a lower iron ore price is set to send the company’s earnings lower over the next couple of years.
Still, this expected fall in profitability seems to be adequately priced in, with Fortescue having a margin of safety at the present time. This is evidenced by a price to book (P/B) ratio of 0.96 which, when you consider that the ASX has a P/B ratio of 1.31, seems to indicate that Fortescue offers value for money at the present time.
Telstra Corporation Ltd
Unlike Fortescue, Telstra Corporation Ltd (ASX: TLS) seems to be rather unappealing based on its current valuation. That’s because it trades on a price to earnings (P/E) ratio of 18.4, which is considerably higher than the ASX’s P/E ratio of 16.4.
However, Telstra has a bright future, with its current strategy being a sound one. As well as aiming to maintain its dominance of the Aussie mobile market, Telstra is also seeking to build its exposure to faster growing Asian markets. And, while a lower interest rate may stimulate the Aussie economy, Telstra’s overseas exposure could help its bottom line to rise at a faster rate than it otherwise would. As such, its rating could move even higher.
In the last year, AMP Limited (ASX: AMP) has been able to post some impressive results. For example, its cash flow per share has increased by a very appealing 26.1% and this improvement has built momentum in the stock so that its share price has risen by 35%.
And there could be more growth to come. That’s because AMP trades on a price to earnings growth (PEG) ratio of just 1.05, which indicates that growth is on offer at a reasonable price. Furthermore, with the Aussie economy more likely to deliver strong performance moving forward following the recent interest rate cut, AMP’s wealth management division could benefit from a buoyant ASX over the medium term.
Of course, finding the best stocks for the long term is a tough task – especially when work and other commitments limit the amount of time you can spend trawling through the index for them.
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Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.
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