History shows that the stock market tends to favour companies that are able to grow their earnings at an above-average rate. Certainly, dividends and value are also important, but when it comes to capital gains, how quickly the bottom line rises seems to be the most important attribute in the minds of most investors. As such, here are three companies that are set to grow earnings at a brisk pace, while also offering good value and decent dividend yields.
After a tough start to the year, market sentiment has picked up strongly over the last six months for Unilever (LSE: ULVR), with shares in the consumer products company increasing by 7% over the period. However, there could be more to come, since Unilever has huge potential when it comes to the long run. Indeed, its products are quickly gaining considerable brand loyalty in emerging markets, with a hefty marketing budget helping to speed-up this process in recent years. For example, the companys bottom line is due to increase by an impressive 9% next year, which is ahead of the FTSE 100s expected growth rate and shows that, while Unilever has long-term potential, it could also outperform the wider index in the shorter term, too.
You may be surprised to see Aviva (LSE: AV) on a shortlist of three growth stocks. However, the insurance company is forecast to bounce back very strongly from a disappointing period, with profits set to more than double in the current year. However, this is no flash in the pan, as Avivas earnings are also due to increase by 10% next year. With shares in the company trading on a price to earnings (P/E) ratio of just 11 and offering a dividend yield of 3.2%, Aviva seems to offer a potent mix of strong growth prospects, as well as good value and a decent yield.
Shares in Glencore (LSE: GLEN) have experienced a strong 2014, with gains of 15% being recorded since the start of the year. However, there could be more to come, since Glencore is forecast to increase earnings by an impressive 11% this year, and by a whopping 38% in 2015. Of course, the result is that Glencore trades on a P/E of 16.5, which represents a significant premium to the FTSE 100s P/E of 13.7. When the growth rate and P/E are combined, though, the resultant price to earnings growth (PEG) ratio of 0.7 suggests that Glencore offers growth potential at a very reasonable price.
Clearly, there are other great growth plays out there. That’s why we’ve written a free and without obligation guide to help you find them, called Where We Think The Smart Money Is Headed.
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Peter Stephens owns shares of Aviva. The Motley Fool UK ownsshares of Unilever. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.