Shares in Whitbread (LSE: WTB) have performed poorly during the course of the last year, being down by 17%. This is at least partly due to concerns surrounding the long-term future of the UK economy, with the introduction of the living wage likely to have a detrimental impact on Whitbreads sales, and interest rate rises having the potential to dampen consumer confidence.
However, the owner of Costa Coffee and Premier Inn seems to be in a strong position to deliver upbeat earnings growth. It has a relatively loyal customer base and this provides it with a competitive advantage over rivals. Furthermore, with Whitbread due to increase its bottom line by 10% in the next financial year it remains a top-notch growth play thatcould benefit from improvedinvestor sentiment.
And with it trading on a price-to-earnings growth (PEG) ratio of only 1.6, there seems to be considerable scope for an upward rerating over the medium-to-long term.
Is Sky the limit?
Similarly, shares in Sky (LSE: SKY) have fallen by 10% in the last year. This is despite the company reporting strong growth in customer numbers and releasing generally positive news flow during the period. However, with the pay-TV and wider quad-play market becoming increasingly competitive, investors could be worried that Sky will see sales and margins come under a degree of pressure.
Certainly, Sky remains a high-quality business but with its bottom line forecast to fall by 6% next year, its shares could be hurt by relatively weak investor sentiment. Looking further ahead, the expansion of Skys services to include mobile could act as a positive catalyst on the companys shares and there are likely to be major cross-selling opportunities.
With Sky trading on a price-to-earnings (P/E) ratio of 15.6, it seems to be fairly priced at the present time. And with it yielding 3.5% despite paying out just 55% of profit as a dividend, it could prove to be a strong income play. Therefore, for long-term investors it appears to be a sound buy, although its share price performance could be rather lacklustre in the short run.
Call to ARM
Meanwhile, ARM (LSE: ARM) has underperformed the FTSE 100 since the turn of the year. Its shares have fallen by 7% while the FTSE 100 is flat. A key reason for this could be concerns surrounding smartphone sales in China. With the worlds second-largest economy experiencing a slowdown inits growth rate, there are fears that smartphone sales could come under pressure. However, with ARM investing in other market segments such as the Internet of Things, its long-term future remains relatively robust.
Furthermore, ARM could gradually become a strong income stock. Its forecast to increase dividends per share by 40% over the next two years and while it still yields just 1.1%, further growth of that nature could push its yield higher over the coming years and this may help to boost investor sentiment.
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