Should You Buy These 5 FTSE 100 Shares?


I have recently been evaluating the investment cases for a multitude of FTSE 100 companies.

Although Britain's foremost share index has risen 6.8% so far in 2013, I believe many London-listed stocks still have much further to run, while conversely others appear overdue for a correction. So how do the following five stocks weigh up?

I reckon beverage can manufacturer Rexam is an excellent pick for any stock investor based on both its growth potential and generous dividend policy.

Rexam announced within its results this week that volumes rose 6% in 2012, pushing revenue 2% higher to £4.3 billion and underlying pre-tax profit 1% higher to £418 million. The company said new contract wins in North America, coupled with growth in Europe and South America, helped to drive the performance.

City brokers expect earnings per share to advance 11% in 2013 and 9% in 2014, up from the 5% increase punched last year. Rexam is striding higher on the back of a rising international footprint, particularly in emerging markets, and steady manufacturing capacity hikes.

Moreover, the firm's plump dividends are also expected to rise over the medium term. Last year's 3.5% yield was in line with the current FTSE 100 average, although that 3.5% figure is forecast to accelerate to 3.7% and 4.1% over the next two years.

I'd bet on credit-services provider Experian to surge higher as it continues to expand strongly in both traditional and developing geographies.

The company's interims released in January revealed third-quarter organic growth of 7%, driven by the rapid progress the group is making in emerging markets.

Revenues in South America, for example, leapt 11% during October, November, and December. I believe that rising affluence levels in these new, juicy end-markets, coupled with bubbly M&A activity across the globe, should underpin future growth.

Following an expected 1% rise in earnings per share for the year ending March 2013, growth is forecast to hit solid double-digit territory in coming years -- a 19% increase next year is projected to rise a further 11% in 2015, according to brokers.

I do not believe a P/E ratio of 21.3 for March 2013 can be considered 'nosebleed' territory given the potential for very decent earnings growth. Furthermore, the P/E reading is projected to drop to 17.8 and 16 in 2014 and 2015 respectively.

I believe that Vedanta is on a stronger footing than many of its mining sector peers, as a significant ramp-up in oil production and lead-zinc metal output in coming years looks set to drive top-line growth higher.

Total oil output jumped 21% in quarter three, Vedanta announced last month, to 205,014 barrels of oil equivalent per day, as operations at the company's Rajasthan field shot higher to 169,977 barrels a day.

The company is aiming to hike Rajasthan output to 200,000-215,000 barrels a day by March 2014, with a view to increasing it to 300,000 barrels thereafter. On the metals front, Vedanta is seeking to increase lead-zinc production to 1.2 million tonnes within the next six years.

Earnings per share is set to edge 2% higher in the year ending March 2013, City analysts predict, before shooting 77% higher the following year and then jumping an additional 25% in 2015.

Accelerating growth is set to drive Vedanta's P/E ratio much lower in coming years -- a value of 13.4 for 2013 is forecast to collapse to 7.6 in 2014 and 6.3 in 2015.

Investors should hold off on Aggreko -- which rents out power and temperature-control equipment across more than 30 countries -- at least in the short term, as demand from the company's key markets remains unpredictable.

The company is in prime position to benefit over a longer time horizon from a growing global population, increasing urbanisation and greater economic growth, particularly in developing countries where it continues to expand.

In the meantime, however, earnings growth could come under increasing pressure. Aggreko warned in December of an uncertain outlook for 2013, adding that its performance was likely to drop from 2012 levels.

City experts expect 2012 earnings per share -- results for which are scheduled for 7 March -- to rise 16%. However, for 2013 growth is expected to dip 6% before rebounding 10% higher in 2014.

These patchy near-term fundamentals do not justify the company's premium rating in my opinion. A P/E reading of 17.2 for 2012 is expected to rise to 18.3 in 2013 before dropping to 16.6 next year.

Associated British Foods
I reckon that Associated British Foods is on course to surge skywards as takings at its Primark budget clothing chain remain on course to tread higher, helped by enduring challenges in the U.K. retail environment.

ABF announced in January that turnover at the chain jumped 25% during the 16 weeks to Jan. 5, which helped drive group revenues 10% higher. Healthy like-for-like sales, extra retail space and greater sales within new stores have all boosted the chain's sterling performance.

Analysts expect ABF's earnings per share to rise 10% in both 2013 and 2014, while new shop openings from 2014 onwards should propel group turnover higher over the longer term.

ABF carries a weighty P/E ratio, which is expected to come in at 19.5 and 17.7 for the next two years. But I believe the possibility of exciting earnings growth, propelled by soaring expansion at Primark, fully justifies this premium rating.

Zone in on other sterling stocks
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Fool contributor Royston Wild has no position in any stocks mentioned. The Motley Fool recommends Associated British Foods. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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