SABMiller plc (SAB): Buy, Sell Or Hold?

5. Valuation: SABMiller’s shares are trading at a forward price-to-earnings ratio of 22, well above its 10-year historical P/E ratio average of 15. It also sports a forecast dividend yield of 2%, twice covered.

My verdict on SABMiller
SABMiller plc (LON:SAB) is an excellent company. It possesses a huge competitive advantage owing to its size and scale and a broad portfolio of leading brands that enables it to deliver high margins, robust cash flows, and good returns on capital. Although economic weakness and uncertainty in Europe continue to weigh down on margins and profits lately, this is more than offset by growth in emerging markets. With a considerable presence in these regions, it is well positioned to deliver future growth. However, the company’s current valuations are already quite high, and its below-average dividend yield provides little downside protection. With a huge portion of its profits coming from emerging markets, and with Europe’s continuing weakness, a slowdown in these economies can send the share price tumbling down.

So overall, I believe SABMiller at 3,430 pence looks like a hold.

The article SABMiller: Buy, Sell Or Hold? originally appeared on Fool.com and is written by Zarr Pacificador.

Zarr Pacificador and The Motley Fool have no position in any of the stocks mentioned.

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