At the present time it may feel as though it is rather difficult to find stocks which offer strong growth prospects. After all, a number of sectors are posting major falls, rather than rises, in earnings while others are failing to reach double-digit net profit gains. And, looking ahead, there could be further uncertainty for the global economy as US interest rates begin their eventual rise and the Chinese economy continues to slow.
As a result of this, companies which are able to increase their bottom lines at a rapid rate could be generously rewarded by investors via a rising share price. With the market having fallen in recent months, now could be a great time to buy them.
One prime example of a company with strong growth potential is Unilever (LSE: ULVR). It is forecast to grow its bottom line by 15% in the current year even though the emerging world (from which Unilever derives most of its sales) is undergoing a difficult period. And, with Unilever trading on a price to earnings growth (PEG) ratio of just 1.5, it appears to offer excellent value for money, too.
Of course, Unilever has vast long term appeal, with the rising wealth of emerging nations set to produce rapidly rising demand for the companys products. Furthermore, Unilever has a considerable amount of diversity so that if one product endures a tough period then it has others to offset this, which should lead to a high degree of resilience and stability, as well as impressive earnings growth.
Unilever also offers strong dividend prospects. Although it currently yields just 3%, its dividends are due to rise by 6% next year and, following that, above-inflation rises are very likely. Therefore, in a number of years it could be yielding in excess of the wider market and growing at a faster rate, too.
Similarly, packaging specialist RPC (LSE: RPC) also has excellent growth prospects. Its earnings are due to rise by 12% in the current year and then by a further 10% next year and, despite this strong rate of growth, its shares still offer good value for money via a PEG ratio of just 1.4. This indicates that the share price growth of 43% over the course of 2015 could continue into 2016.
As todays half-year update from the company shows, RPCs acquisition of Promens has thus far been successful. The unit has been successfully integrated and further synergies are expected, with RPC also able to contribute organic growth in recent months. And, with dividends due to rise by 11% next year, RPC could become a useful income play over the medium term, too.
Meanwhile, defence company Cohort (LSE: CHRT) today announced the award of a $9.7m Ministry of Defence contract to provide training and support to Joint Services Command. This should positively contribute to the current years financial performance of Cohort, with the contract beginning in April and due to last for two years with an option for a further two years.
Although Cohorts share price has soared by 80% this year, there is still scope for a further rise. Thats because it is forecast to increase its bottom line by 9% this year and by a further 16% next year. This puts it on a PEG ratio of only 1, which indicates that it offers strong growth potential at a very reasonable price.
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Peter Stephens owns shares of Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended RPC Group. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
