Such has been the improvement in investor sentiment in Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) during recent months that its shares are now down just 12% over the last year. Considering how disastrous the period has been for its bottom line, that’s a very good result and provides evidence that investors can be very forgiving for stocks with turnaround potential.
And, looking ahead, Tesco is very much on course to turn its fortunes around. For example, next year it is forecast to return to earnings growth for the first time since the 2012 financial year and, following that rise, it is expected to increase its bottom line by a whopping 30% in financial year 2017. This puts Tesco on a price to earnings growth (PEG) ratio of just 0.6, which indicates that its share price strength in recent months could be just the beginning of a prolonged period of strong performance.
British American Tobacco
In the short term, British American Tobacco (LSE: BATS) (NYSE: BTI.US) may not seem like such an appealing stock to buy a slice of. That’s because the dual threat of increased regulations and greater illicit trade in cigarettes is causing volumes across the tobacco industry to fall. And, while price increases will offset much of this decline, it is likely to hold back investor sentiment in the short run.
However, British American Tobacco still has a very bright future. Notably, the e-cigarette space holds significant growth potential and could rejuvenate the industry’s top and bottom lines. And, in the meantime, British American Tobacco remains a top income stock, with it yielding 4.3% at the present time and being forecast to increase dividends per share by an impressive 2.9% next year.
The best time to buy any stock is when its near term future appears to be somewhat uncertain, but while it also has a bright long term future. That’s the current situation for SSE (LSE: SSE), with there being significant political risk in investing in the company right now, owing to the potential for an energy price freeze and new regulator under a Labour government.
As such, shares in SSE trade on a very appealing valuation with, for example, it having a price to earnings (P/E) ratio of just 13.8 (versus 16 for the FTSE 100). In addition, SSE offers a yield of 5.9%, which is not only stunning, but is also set to rise to 6% next year. As such, and while the short term may be challenging, SSE appears to be a great buying opportunity right now.