With volatility still swirling through global equity markets, the share prices of some leading, high-quality businesses are starting to look attractive.
Consider for instance Coca-Cola Amatil Ltd (ASX: CCL), Healthscope Ltd (ASX: HSO) and Platinum Asset Management Limited (ASX: PTM). The share prices of these three companies are all trading near fresh 52-week lows which in most instances also represent multi-year lows.
At these levels, arguably long-term investors with a buy-and-hold strategy and the ability to look though the current market gyrations could view these stocks as attractively priced.
Here's why:
According to Thomson Consensus Estimates, the outlook for beverage maker Coca-Cola Amatil is positive with earnings per share (EPS) forecast to increase to 54 cents per share this financial year (FY) and then grow to 58 cps in FY 2017.
With the share price slipping to $8 today, that implies a FY 2017 price-to-earnings (PE) ratio of 13.8x which is significantly below the average multiple of both the Consumer Staples sector and the wider S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
Next up, Healthscope's shares are now trading within a whisker of the lowest point they have traded at since their initial public offering (IPO) in August 2014.
Like its peer Ramsay Health Care Limited (ASX: RHC), Healthscope operates in the attractive growth sector of private hospitals and according to consensus data the group's EPS should grow to 11.6 cps in FY 2017, implying a PE ratio of 19.6x. While that may not appear cheap, relative to the Health Care sector it does imply a slight discount.
Finally, investors are obviously concerned about what the equity markets sell-off is doing to the level of funds under management at listed global investment house Platinum.
Based on consensus data Platinum is forecast to grow EPS to almost 42 cps in FY 2017. With the shares changing hands around the $6.50 level today that implies a PE ratio of 15.5x which is below the market average.
Of course not all companies do, nor should they, trade in line with a market average, however utilising a relative valuation technique can help identify opportunities worthy of further investigation.
