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.
- 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.
- 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.
- 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%.
- 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.
