5 Growth Greats You Simply Can’t Ignore: GlaxoSmithKline plc, British American Tobacco plc, CRH PLC, Whitbread plc And Compass Group plc

Royston Wild outlines the investment case for GlaxoSmithKline plc (LON: GSK), British American Tobacco plc (LON: BATS), CRH PLC (LON: CRH), Whitbread plc (LON: WTB) and Compass Group plc (LON: CPG).

| 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.

Today I am looking at a cluster of blue-chip wonders offering up terrific growth potential.

GlaxoSmithKline

The enduring effect of patent losses across key drugs is expected to keep earnings on the back foot at GlaxoSmithKline (LSE: GSK) for a little while longer. Indeed, the business is expected to clock up its fourth consecutive annual bottom line decline in 2015 as a result, with the City chalking in an unhelpful 4% decline.

Although any dip is hardly room for cheer, this year’s expected drop marks something of an improvement from recent years and illustrates the rewards of significant organic investment — not to mention solid acquisitions and industry collaborations over the years — on the company’s pipeline.

As a result GlaxoSmithKline is expected to flip back into the black this year with a 4% uptick, driving a P/E multiple of 18.2 times predicted earnings for this year to 17.2 times for 2016. I believe that GlaxoSmithKline’s market-leading proposition in key areas such as vaccines, combined with galloping healthcare from developing regions, makes the pharma play a steal at these levels.

British American Tobacco

In my opinion, British American Tobacco (LSE: BATS) remains a solid selection for growth hunters, despite the impact of regulatory constraints on tobacco usage and marketing and their effect on consumer spend. With disposable income levels in critical emerging markets — home to the lion’s share of the world’s smokers — heading higher, and the London firm ramping up its exposure to the lucrative e-cigarette market, I believe the business is an exceptional long-term growth selection.

Although the City expects British American Tobacco to record a modest 1% earnings improvement in 2015, the bottom line is expected to leap 8% in the following year as demand for its products takes off again.

Like GlaxoSmithKline, the tobacco giant trades on P/E multiples outside the benchmark of 15 times which indicates lip-smacking value, with readings of 17.8 times and 16.6 times for 2015 and 2016 respectively. But I believe the company’s suite of smoker favourites such as Lucky Strike, labels which carry formidable pricing power, merits this premium rating.

CRH

With the construction sector in the US on the march, and building activity in Europe gradually improving, I reckon that materials supplier CRH (LSE: CRH) is in prime position to enjoy resplendent earnings growth. And underpinned by shrewd asset juggling to make acquisitions in hot growth areas — indeed, the business sold off its Doras joint venture in France for €37m just yesterday — I believe the Dublin-based firm has both the financial clout and the know-how to keep the bottom line rising.

This view is shared by the number crunchers, who expect CRH to deliver splendid earnings expansion in the region of 47% in 2015, and a further 32% next year. Consequently the construction play’s P/E multiple collapses from 22.7 times for this year to 17.2 times in 2016, and I expect this to keep sliding as conditions in its end markets steadily improves.

Whitbread

Hotel and cafe operator Whitbread (LSE: WTB) has a terrific record of generating rip-roaring earnings growth, and has seen the bottom line expand at a compound annual growth rate of 14.5% during the past four years alone. And with revenues across its Costa Coffee and Premier Inn brands continuing to outperform — total sales surged 14.3% in the year concluding February 2015I believe the company is one of the hottest stocks on the market.

Indeed, Whitbread is anticipated to follow a 23% earnings advance for fiscal 2015 with additional rises to the tune of 15% and 14% in 2016 and 2017 respectively. Although P/E multiples of 22.9 times for this year and 20 times for 2017 may not at first glance appear the most appealing, in my opinion the firm’s aggressive expansion plans — Whitbread plans to lift capital expenditure to £700m in 2016 alone from £575m last year — should keep earnings rattling higher in the long term.

Compass Group

Like Whitbread, I believe Compass (LSE: CPG) is a great selection for those hunting for dependable earnings growth year after year. The catering specialists said last month that strong organic growth in Europe and the US, not to mention contract wins in emerging markets, is helping to power sales higher — indeed, organic revenue growth in new regions to register at 14% during October-March.

The abacus bashers expect Compass to record earnings growth to the tune of 13% for the 12 months ending September 2015, creating a chunky P/E ratio of 22.1 times. Predictions of a further 9% improvement in the following year drives this reading to 20.4 times, and although this remains elevated I believe that the firm’s exceptional performance across multiple global markets should help to keep the bottom line moving steadily 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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

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 »