Today, I’m looking at four stocks offering growth at a reasonable price.
With an enviable portfolio of hotel brands, Intercontinental Hotels Group (LSE: IHG) has a lot of potential. Despite fears of a slowdown in the global economy, hotel revenues continue to grow at a robust pace, while vacancy rates carry on declining. Margins have improved too, as revenue per room rose 1.5% in the first quarter of 2016.
With 220,000 new rooms hitting the market over the next few years, IHG has one of the sector’s largest development pipelines and is well positioned for further growth. City analysts expect this will lead adjusted earnings to expand 10% this year, with a further 16% gain forecast for 2017.
This means that although IHG shares currently trade at a pricey 22.3 times earnings, its forward price-to-earnings ratio would fall to a more modest 20.2 multiple on this year’s earnings (before dropping to just 17.4 by 2017).
Meanwhile, publisher Relx (LSE: REL) is expected to post a 12% rise in adjusted earnings per share this financial year, with a further increase in earnings of 7% in 2017. This puts Relx on a forward P/E of 17.9 and a PEG ratio of just 1.5, which indicate its shares offer growth at a reasonable price.
As well as upbeat growth prospects, Relx has an impressive track record that may not be fully be appreciated by the market. Over the past five years, adjusted EPS and dividends per share have increased by a compound annual growth rate (CAGR) of 6.9% and 7.8%, respectively.
One company that appears to be attractively priced given the value of its underlying assets and dividend potential is real estate investment trust, or REIT, Hammerson (LSE: HMSO). The retail and office-focused property company trades at an 18% discount to its net asset value (NAV) of 710p per share.
Fears over a potential downturn in the UK commercial property sector and uncertainty created by the EU referendum have led to a sector-wide sell off, but Hammerson is particularly attractive because it has one of most generous dividends. The REIT currently yields 3.8%, but with dividends set to soar 7% this year, and a further 6% in 2017, its forward dividend yields rise to 4.1% and 4.4% for 2016 and 2017, respectively.
You’ve probably all seen Photo-Me’s (LSE: PHTM) self-service photo booths everywhere, but you may not know the company has a new product in town: professional self-service washing machines. These industrial-sized automated laundry machines can hold a wash of up to 18kg, and are most frequently located in supermarket car parks.
Doing your laundry in a car park may initially seem to be strange affair, but with over 1,200 units operated by the company and a further 500 units sold to third parties, the product seems to be catching on. By 2020, the company plans to have 6,000 of these units in operation across Europe.
The outlook for its core photography business is enticing too. A new ID card launched in Japan earlier this year and a new format driving license in France should see continued robust growth over the next few years. For Photo-Me as a whole, revenue for the quarter ended 31 January was 11% higher, with profits increasing by almost 90% compared to the same period last year.
Looking forward, analysts expect full year adjusted EPS to grow 14% this year, with 10% and 8% growth pencilled-in for the following two years.