Cheap shares are widely available after this year’s stock market crash. Today, I’m looking at three strong, brand-rich FTSE 100 companies, currently on offer at knockdown prices.
In the short term, markets could remain volatile. However, if you have a long-term investing horizon, I believe these three stocks could help you get rich and retire early.
Cheap shares #1
Associated British Foods (LSE ABF) is best known for its ownership of leading value fashion chain Primark. It accounted for over 60% of ABF’s profits last year. In addition, the group’s second-largest business — grocery (25% of profits) — is chock full of strong brands. Twinings, Patak’s and Ryvita are just three of its big sellers.
ABF’s record of earnings growth will have a hole blown in it this year. Its financial year ends this month, and it’s forecast to post a 45% fall in earnings. This is due to Primark stores having been shuttered during lockdowns.
However, City analysts expect earnings to recover in ABF’s 2021 financial year, albeit not exceeding pre-pandemic levels until fiscal 2022.
As I’m writing, the shares are at a 25% discount to their pre-pandemic level. The market is valuing ABF at 27 times forecast 2021 earnings, falling to 17 times for 2022. I reckon the shares are cheap for a brand-rich company, particularly as Primark has a large international growth runway. I rate the stock a ‘long-term buy’.
Expensive brand but cheap shares
Founded in 1856, Burberry (LSE: BRBY) has built a unique fashion heritage as a purveyor of classic quintessential British style. It seems to have an enduring appeal around the world.
Sales were severely impacted by lockdowns in the first quarter of Burberry’s current financial year. As such, City analysts are expecting a 40% fall in earnings for the full year (ending March 2021).
However, as with ABF, the analysts have pencilled-in an earnings recovery the following fiscal year, and anticipate earnings exceeding their pre-pandemic level the year after.
The shares are at a 37% discount to their 2020 high before the stock market crash. If we look beyond the current year, we have an earnings multiple of 21, falling to 18 the year after. I reckon this is a cheap rating for such a powerful luxury brand. I see them as a great long-term buy for investors aiming to get rich and retire early.
Another stock market crash bargain
Whitbread (LSE: WTB) owns the UK’s biggest hotel chain, Premier Inn. It’s not only the biggest chain, but also consistently rated the most popular hotel brand in the UK by YouGov and other independent bodies.
Whitbread was hard-hit by lockdown. Premier Inn had to close its doors to guests, as did the group’s chains of eateries, which include Brewers Fayre and Beefeater. As a result, Whitbread is expected to post a loss for its financial year ending February 2021.
The WTB share price is down over 40% in 2020. Looking beyond the current loss-making year to an earnings multiple of 32.5, followed by 21, the shares may still not seem cheap. However, Whitbread is in the early stages of a strategy to replicate Premier Inn‘s huge UK success in Germany.
In the belief we’re looking at a highly credible, multi-decade growth story of a proven brand, I think Whitbread is another strong FTSE 100 business whose shares are cheap. As such, I’d be happy to buy the stock for the long-term.
G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods and Burberry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.