3 Of My Favourite Growth Stocks: Unilever plc, Restore PLC And Burberry Group plc

These 3 stocks have the potential to make stunning gains: Unilever plc (LON: ULVR), Restore PLC (LON: RST) and Burberry Group plc (LON: BRBY)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While searching for income and value is a sound starting point for all investors, ultimately a company’s growth potential is what really matters. For example, buying a company with a great yield or which has a cheap share price may be a good move, but to generate stunning capital gains that company must also be able to increase its net profit by more than the wider market over a sustained period.

In other words, earnings growth is a major catalyst for share price growth and, in this regard, document storage company Restore (LSE: RST) seems to have huge potential.

For example its share price is up by over 6% today after the company released an upbeat set of results that show a degree of confidence in its future outlook. That is despite pretax profit falling slightly versus the same period of last year as a result of M&A activity, redundancies and other exceptional costs.

Still, Restore is on target to grow its earnings on an adjusted basis by as much as 25% this year and by a further 13% next year. This puts it on a price to earnings growth (PEG) ratio of just 1.1, which indicates that it offers growth at a very reasonable price. And, best of all, the company’s earnings are relatively resilient and reliable, since document storage has a high degree of customer loyalty, thereby making Restore a great long term growth prospect.

Similarly, luxury fashion brand Burberry (LSE: BRBY) has excellent long term growth potential. Certainly, its sales and profitability may come under pressure in the short run as the Chinese economy continues to make a soft landing. However, the strength of its brand is exceptional and, realistically, Burberry could attempt to further increase its pricing so as to boost sales and margins.

Looking ahead, earnings growth of 10% is being pencilled in for next year. Although this figure was more than double that level in the earlier part of the current decade, Burberry continues to offer market-beating growth even during what is expected to be a difficult trading period for the business. However, with a high degree of customer loyalty, a diverse geographical spread and the potential to expand into new niches, Burberry’s price to earnings (P/E) ratio of 15.8 indicates good value for money.

Similarly, it is the long term growth prospects of Unilever (LSE: ULVR) that hold great appeal. As with Burberry, the short term outlook may not be as positive as previously anticipated, with growth of 9% forecast this year and 6% expected next year. However, with a growing middle class across the developing world, Unilever’s mid to upper-tier price point products are likely to see an increase in demand as individuals seek to use perceived better quality and more expensive items than they have in the past.

And, with Unilever generating around 60% of its revenue from emerging markets, it is well-placed to benefit from a trend which has been present for many decades. So, while the next few years may be somewhat slower in terms of economic growth for the likes of China, the reality is that the consumer economies of the developing world are likely to produce strong growth and push Unilever’s sales and profit much higher.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Burberry, Restore plc, and Unilever. The Motley Fool UK owns and has recommended Unilever. The Motley Fool UK has recommended Burberry. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »