Shares in equipment rental firm Ashtead (LSE: AHT) have soared by over 8% today after the company released an upbeat set of half-year results. On an underlying basis, sales increased by 18% versus the first half of last year, with pre-tax profits surging by 21% versus the same period.
A key reason for this is the strength of the US economy, with 86% of Ashteads revenue being derived from the US versus 83% a year ago. Looking ahead, this increased focus on a fast-growing US market is likely to continue to push the companys profitability northwards.
In fact, Ashteads expectations for the full-year have been increased after todays update, with the company stating that it expects to beat previous guidance. Its management team appears to be very confident in the outlook for the business, with capital expenditure being increased to 1.1bn as it seeks to invest for future growth. And with Ashtead increasing dividends per share by 33%, its quickly becoming a relatively appealing income play.
Will it stay that way? It looks likely.Ashtead is forecast to increase its bottom line by 24% in the current year and by a further 18% next year. Despite this, it trades on a price-to-earnings (P/E) ratio of just 14.5, which indicates that 2016 could see excellent capital gains for the companys investors.
Long term performers
Also having the potential to rise sharply in 2016 is Barclays (LSE: BARC). It has endured a relatively troubled period, with a change in management as well as uncertainty regarding regulatory action and possible fines. While the latter could continue over the medium term and act as a dampener on the banks share price, the appointment of a new CEO means that the former may cease to act as a brake on itsshare price performance.
Clearly Barclays is performing well with regards to its profitability. Itdelivered a double-digit rise in earnings last year and is expected to repeat this in both the current year and the next. Encouragingly, it trades on a P/E ratio of just 10.3 and this indicates that theres vast upward rerating potential. The market may be rather downbeat on the wider financial services sector at the moment. But for long term value and growth investors, Barclays remains a top pick. It could come good in 2016 on the back ofa refreshed strategy and reduced operational challenges.
MeanwhileBurberry (LSE: BRBY) has also experienced a challengingrecent past with a slowdown in China hurting its sales performance. Although it hasprofitedfrom increasing exposure to China, the flip side is that its becoming increasingly reliant on the worlds second largest economy for sales growth. While this could hurt the firmin 2016, in the long run its likely to be a major advantage for Burberry with over 300m Chinese due to become middle income earners in the next 15 years.
Burberrys share price could come under further pressure as the Chinese economy continues to slow. And with its shares trading on a P/E ratio of 15.3, they could be subject to a further derating in the near term. However,the longer term strength of Burberrys brand, the potential for rapid consumer sales growth in China and its wide geographical spread mean that Burberry holds great appeal at the present time.
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