Is Now the Time to Buy Capital Shopping Centres?

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 Capital Shopping Centres  to determine whether you should consider buying the shares at 362 pence.

I am assessing each company on several ratios:


Price/Earnings (P/E): Does the share look 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:

StockPrice3-Yr. EPS HrowthProjected P/EPEGYield3-Yr. Dividend GrowthDividend Cover
Capital Shopping Centres 362p 9% 22.2 N/A 3.8% -9% 1.1

The consensus analyst estimate for next year's earnings per share is 16.3 pence (1% decline) and dividend per share is 15.1 pence (1% growth).

Trading on a projected P/E of 22.2, Capital Shopping Centres appears to be slightly cheaper than its peers in the retail investment trust sector, which are currently trading on an average P/E of around 23.4.

Unfortunately, Capital Shopping Centres' P/E ratio and falling near-term growth rate give a negative PEG ratio, which cannot be of any help with my analysis.

Offering a 3.8% yield, the group's dividend supplies the same income as the retail investment trust sector average. However, Capital Shopping Centres has seen its dividend fall a compounded 9% over the past three years, implying the yield could soon begin to lag that of its peers.

Furthermore, the dividend is only just covered by earnings and does not give Capital Shopping Centres much room for further payout growth.

Growth is stagnating, but should you buy for its yield?
Capital Shopping Centres is the owner of 15 shopping centres throughout the U.K., which leaves the company very exposed to the U.K.'s frail retail environment.

That said, within its interim report released last November, Capital Shopping Centres reported that 60 new stores had opened recently within its shopping centres -- taking the overall occupancy level to 96%.

In addition, the company reported that footfall figures within its shopping centres had continued to remain flat.

I believe there is one issue that is holding Capital Shopping Centres back, and that is debt.

You see, like most retail investment trusts, Capital Shopping Centres relies on debt to fund its expansion. However, Capital Shopping Centres' debt has grown rapidly and now accounts for 120% of the company's market capitalization. The worrying thing is, I can see interest payments on this debt currently amount to 60% of the company's gross profit.

Even so, Capital Shopping Centres continues to look for further opportunities to expand. Indeed, the company is currently involved in the construction and regeneration of four major shopping centres, which in my opinion puts further strain on the group's balance sheet.

So all in all, taking into account Capital Shopping Centres' poor balance sheet and relatively average yield compared to the rest of the sector, I believe now does not look to be a good time to buy Capital Shopping Centres at 362 pence.

More FTSE opportunities
Although I feel now may not be the time to buy Capital Shopping Centres, I am more positive on the FTSE shares highlighted in "Top Income Plays Held By Britain's Super Investor." This exclusive report reveals the favorite income stocks owned by Neil Woodford -- the City legend whose portfolios have thrashed the FTSE All-Share by 200% during the 15 years to October 2012.

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

The article Is Now the Time to Buy Capital Shopping Centres? originally appeared on Fool.com.

Rupert does not own any share mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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