Why BAE Systems plc, Micro Focus International plc And Jimmy Choo PLC Could Help You Retire Early

These 3 stocks have excellent long-term prospects: BAE Systems plc (LON: BA), Micro Focus International plc (LON: MCRO) and Jimmy Choo PLC (LON: CHOO).

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Despite falling by as much as 5% today, Jimmy Choo (LSE: CHOO) could prove to be a star long-term performer. The luxury lifestyle brand today released an upbeat set of results for the 2015 financial year that show it’s moving in the right direction. For example, revenue increased by over 7% on a constant currency basis, while it delivered a strong performance in Asia and especially Japan.

Furthermore, Jimmy Choo improved its supply chain, increased cash conversion to 96.5% (from 92.2% last year) and reduced bank leverage to 1.9x from 2.19x. And with it having started the rollout of its New Store Concept, sales growth over the medium term could be set to gain a boost.

Clearly, Jimmy Choo’s share price has been hurt by uncertainty surrounding Chinese growth, with the company having a major presence in the world’s second-largest economy. In the long run, this could provide strong sales growth for Jimmy Choo as it offers a wider range of products on its journey to becoming a diversified lifestyle brand. And with its shares trading on a price-to-earnings growth (PEG) ratio of just 1.1, it seems to offer excellent capital gain potential.

Shares set to rise?

Also in the news today is Micro Focus (LSE: MCRO), with the international software company announcing the acquisition of Serena Software for $540m. This will be paid for partly out of a £150m placing which was also announced today, with the deal being consistent with Micro Focus’ established acquisition strategy and its focus on the efficient management of mature infrastructure software products.

As such, the acquisition seems to be a sound move for the company and one which could act as a positive catalyst on its share price. And despite rising by 25% in the last year, shares in Micro Focus trade on a hugely appealing price-to-earnings (P/E) ratio of 13.8. This indicates that an upward rerating is on the cards, with the company’s yield of 2.8% likely to improve for existing investors owing to its dividend coverage ratio of 2.6 and high single-digit earnings growth prospects. Therefore, now could be a good time to buy a slice of Micro Focus for the long term.

The great survivor

Meanwhile, BAE Systems (LSE: BA) could also help you retire early. It’s surviving during a challenging period for the global defence sector, with the world’s biggest military spender, the US, cutting back in recent years. As such, investor sentiment towards the wider defence sector has weakened somewhat and BAE trades on a P/E ratio of just 12.7, which for a major defence player seems to be rather low.

Of course, this valuation is somewhat understandable given BAE’s forecast fall in earnings of 3% this year. But with growth set to return next year and the longer-term outlook for the US economy (and defence spending) being high, BAE’s capital gains could be significant. In fact, it could easily beat the wider index in the long run and when this is added to its yield of 4.3%, BAE’s total returns could have a major impact on its investors’ retirement plans.

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 BAE Systems and Jimmy Choo. The Motley Fool UK has recommended Micro Focus. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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