Forget 2016! Why AstraZeneca plc & Royal Mail PLC Are Exceptional Long-Term Stock Picks

Royston Wild explains why AstraZeneca plc (LON: AZN) and Royal Mail PLC (LON: RMG) are white-hot growth selections.

| 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 two stocks with explosive long-term earnings potential!

Pills provider poised to charge

Growth hunters would have been well advised to steer well clear of pharmaceuticals giant AstraZeneca (LSE: AZN) in recent  years. A steady stream of patent losses across critical labels, such as its Nexium stomach treatment, has created prolonged havoc with the firm’s bottom line, and further profit pain is expected as generic competition continues to hit sales.

Indeed, AstraZeneca is expected to suffer a 2% earnings decline in 2015, marking the fourth successive bottom-line slip if realised. And an extra 6% slide is predicted for 2016.

Still, the London-listed firm’s efforts to inject life into its product pipeline and offset the loss of sales-driving labels is enjoying strong momentum. AstraZeneca received approval for its Tagrisso, Brilique and Lesinurad products from the European Medicines Agency during the past week, a promising omen in gaining European Union approval. And the business remains active on the M&A front, in a bid to give its development drive further fuel.

Although a P/E multiple of 16.5 times for next year is outside the watermark of 15 times that signals attractive value, I reckon AstraZeneca remains a bargain at these levels as its next generation of market-leading products are poised to hit the shelves.

And I believe the improving earnings picture should significantly bolster the Cambridge-based company’s dividends prospects, too. In the meantime, a maintenance of the 280-US-cent-per-share reward through to the end of next year — a dividend that has been frozen since 2011 — still yields a brilliant 4.2%.

Courier set to deliver stunning gains

Likewise, I believe that Britain’s oldest courier Royal Mail (LSE: RMG) should also safely hurdle expected turbulence in fiscal 2016 and post stellar earnings growth in the coming years.

The vast costs of restructuring are expected to push the bottom line 20% lower during the 12 months to March 2016. But as these expenses gradually reduce, and the growing popularity of e-commerce drives parcel traffic steadily higher, Royal Mail is expected to see earnings advance thereafter — indeed, a 10% advance is chalked in for fiscal 2017.

Not only does Royal Mail’s stranglehold on the UK packages and letters market give it terrific scope for growth, but the company’s pan-European logistics division (GLS) also continues to perform exceptionally well — revenues here galloped 8% between April and September thanks to growth in most of its territories.

And like AstraZeneca, I believe this scenario should significantly bolster dividends in the long term. The parcels play is anticipated to hike last year’s 21p per share reward to 21.7p in fiscal 2016, yielding a market-busting 4.6%. And Royal Mail’s solid growth prospects are anticipated to drive the dividend to 22.7p in 2017, yielding a delicious 4.9%.

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 AstraZeneca. 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

Investing Articles

3 super-safe dividend shares I’d buy to target a £1,380 passive income!

Looking to maximise your chances of making a large passive income? These FTSE 100 and FTSE 250 dividend shares might…

Read more »

Investing Articles

I’ve just made a huge decision about my Scottish Mortgage shares!

Harvey Jones has done pretty well after buying Scottish Mortgage shares a year ago but the closer he examines the…

Read more »

Investing Articles

These top passive income stocks all go ex-dividend in October!

Paul Summers has been running the rule on some brilliant passive income stocks, all of which have ex-dividend deadlines coming…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing For Beginners

2 Warren Buffett-type stocks in the UK’s FTSE 100 index worth a look today

Warren Buffett likes to invest in high-quality companies. He also likes to buy when valuations are attractive and he can…

Read more »

artificial intelligence investing algorithms
Growth Shares

The next industrial revolution has begun. Here are 3 growth stocks at its heart

Edward Sheldon believes these three growth stocks will do well as the AI industry grows and the world becomes more…

Read more »

Investing Articles

Given the current economic climate, is there value to be found in UK penny stocks?

Our writer evaluates the prospects of two promising penny stocks on the London Stock Exchange. They each have a compelling…

Read more »

Investing Articles

With yields at 9%+, I expect even more from these FTSE 100 dividend stocks

I'd thought FTSE 100 yields might be declining by now, as the stock market starts to gain. Can these big…

Read more »

A young black man makes the symbol of a peace sign with two fingers
Investing Articles

2 risky shares for investors to consider buying

It’s important to consider what could go wrong when working out which shares to buy. But sometimes the potential rewards…

Read more »