The S&P/ASX 300 (Index: ^AXKO) (ASX: XKO) is currently trading on a price-to-earnings (PE) multiple of approximately 18.4x financial year (FY) 2015 earnings.
That's a reasonably bullish multiple compared with long-term historical averages. Of some concern in particular, this full multiple incorporates forecast earnings growth of just 4.4%.
The worry for investors is that given the lacklustre state of the economy, even this level of muted growth expectations may turn out to be ambitious. This, in turn, could lead to actual reported earnings this August coming in below forecasts.
The following three large-cap stocks (according to research provided by Thomson Consensus Estimates) are all trading on forecast multiples below the index, while at the same time their forecast growth rates post FY 2015 are above average.
- Orica Ltd (ASX: ORI) is a leading explosives maker which is exposed to the slowing resource sector. Despite this headwind which will affect FY 2015 earnings, the company is still expected to grow earnings per share over the next two years. With Orica forecast to earn 138.7 cents per share (cps) in FY 2015 and the shares trading at $19.18, the implied forward PE is 13.8x.
- Caltex Australia Limited (ASX: CTX) is nearing the completion of its strategic initiatives to realign the group's operations. Consensus forecasts have the company earning 201.1 cps in FY 2015 which implies a PE of 16.8x based on a share price of $33.76.
- Henderson Group plc (ASX: HGG) is a leading global fund manager that is benefiting from relatively buoyant stock markets and positive fund inflows. With the group expected to report higher earnings over the next few years and with the stock trading on a FY 2015 PE of 17.3x (based on a share price of $5.70 and forecast earnings per share of 32.9 cps), Henderson is also a stock which could be headed higher.
The earnings growth profiles of the above three stocks could mean there is more upside in their shares than is the case for most other stocks. However before you go out and buy any of these, there is one other stock you really should consider…
