Is Now the Time to Buy Rexam?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today I am looking at�Rexam (LSE: REX  ) to determine whether you should consider buying the shares at 507 pence.

I am assessing each company on several ratios:

• Price/Earnings (P/E):�Does the share look like a good value when compared against its competitors?
• Price Earnings Growth (PEG):�Does the share look like a good value factoring in predicted growth?
• Yield:�Does the share provide a solid income for investors?
• Dividend Cover:�Is the dividend sustainable?

So let's look at the numbers:

Stock	Price	3-Year EPS Growth	Projected P/E	PEG	Yield	3-Year Dividend Growth	Dividend Cover
Rexam	507p	7%	12	0.7	3.1%	22%	2.2

The consensus analyst estimate for next year's earnings per share is 42 pence (18% growth) and dividend per share is 18.5 pence (12% growth).

Trading on a projected P/E of 12, Rexam appears cheaper than its peers in the general industrials sector, which are currently trading on an average P/E of around 16.7.

Rexam's P/E and high double-digit growth rate give a PEG ratio of around 0.7, implying the share is significantly under-priced for the near-term earnings growth the firm is expected to produce.

Rexam supports a 3.1% dividend yield, which is slightly below the sector average of 3.3%. However, Rexam has a three-year compounded dividend growth rate of 22%, implying the yield could soon catch up to that of its peers.

Indeed, the dividend is more than two times covered by earnings, giving Rexam plenty room for further payout growth. In addition, Rexam recently returned �370 million to shareholders through a special dividend.

Furthermore, up until 2009 Rexam had raised its dividend every year for fifteen years. However, during 2009 Rexam had to cut its dividend to pay off debt.

Near-term growth is strong and the company trades at a discount to its peers
As I say, Rexam is currently trading at a discount to its peers and I believe the shares appear undervalued. You see, Rexam is an international manufacturer of aluminum drinks cans and plastic packaging, both of which are products that are always in demand.

In particular, Rexam is the sole producer of cans for the highly successful�Red Bull�energy drink.

That said, Rexam has had a tough few years since 2007. Back then, Rexam acquired a Russian can producer in an attempt to expand and improve revenues. However, the deal saddled Rexam with too much debt and the company had to undertake a rights issue during 2009.

Nonetheless, since 2009, Rexam has streamlined its business by selling off non-core assets and the company's net debt now stands at only �700 million, down from �2.6 billion in 2009.

Furthermore, Rexam is now seeking to expand and recently announced it was spending �150 million constructing a new state-of-the-art can manufacturing plant in Switzerland -- funded entirely from the company's 2012 profit.

Overall, based on the company's strong predicted growth and the valuation discount to peers, I believe now looks to be a good time to buy Rexam at 507 pence.

More FTSE opportunities
As well as Rexam, I am also positive on the FTSE 100 share highlighted within this�exclusive free report.

You see, the blue chip in question offers a 5.7% income, its shares�might be worth 850pcompared to about 700 pence now -- and it has just been declared "The Motley Fool's Top Income Stock for 2013!"

Just�click here�to read the report -- it's free.

In the meantime, please stay tuned for my next verdict on a FTSE 100 share.

link