Leading pallet, crate and container pooling company Brambles Limited (ASX: BXB) enjoyed a 2% share price rally on Friday to close the week's trading flat. That was a great result compared with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which slumped a total of 4.3% over the five trading sessions.
Last week's market outperformance has been a common theme for this blue-chip stock with the share price outperforming the index over the past six months, one year and five-year time frames.
Having previously cast off what management considered a distraction in the form of document management company Recall Holdings Ltd (ASX: REC), the streamlined Brambles has now been operating as a standalone company for a full 12 months.
That makes the recently released financial results for the year ending June 30 2015 the first which incorporate a full 12 months without Recall. Interestingly, since the demerger in late December 2013, the share price of Brambles has gained just 6.1%, while Recall's share price has surged thanks in part to a takeover offer from the US-based Iron Mountain.
The full year results from Brambles showed the group meet guidance and deliver solid results. Sales revenue grew 8% to US$5.5 billion on a constant currency basis, while profit after tax and basic earnings per share both jumped 7% to US$585.5 million and US37.4 cents respectively on a constant currency basis. Meanwhile the full year dividend grew to AU28 cents per share.
Based on these figures, the stock is trading on a price-to-earnings (PE) ratio of 18.4x and an unfranked yield of 2.8%.
Of course determining the fair value of a stock requires analysing the future outlook. To help with this task it is worth reviewing the guidance summary from the recent results presentation, which provide some clues for investors for what to expect in the current financial year.
Expectations for the current financial year are for sale revenue and underlying profit to increase by between 6% and 8% on a constant currency basis – this implies an underlying profit (EBIT) of US$1 billion to US$1.02 billion.
That's a solid growth rate for a large, blue-chip company – particularly considering the sluggish state of the global economy – and could well justify the forward PE multiple of the stock.
