Forget short-term pain! Why Diageo plc, Prudential plc and BBA Aviation plc should provide long-term gain

Royston Wild explains why Diageo plc (LON: DGE), Prudential plc (LON: PRU) and BBA Aviation plc (LON: BBA) could provide handsome returns in the years ahead.

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Today I’m looking at three Footsie-listed stars set to deliver stunning returns in the years ahead.

Foreign firecracker

Unsurprisingly, the impact of economic cooling in Asia is predicted to weigh on Prudential’s (LSE: PRU) bottom line in the near term.

The City expects Prudential to endure a 7% earnings slide in 2016, drawing to a close the firm’s proud record of generating chunky earnings growth year after year.

However, this figure still creates a very-attractive P/E ratio of 11.4 times. And I reckon this represents stunning value given Prudential’s exceptional long-term prospects, starting from next year when a 9% rebound is predicted.

Asia is undoubtedly the jewel in The Pru’s crown, with operating profit there chugging 17% higher in 2015, to £1.3bn. And business from these ‘new regions’ is expected to surge well into the future as rising wealth levels drive financial product demand.

With Prudential also making waves in the UK and US, I reckon the stock is in great shape to deliver pukka profits growth.

Set to fly

Economic sluggishness across the Pond is likely to weigh on corporate jet specialist BBA Aviation (LSE: BBA) in the near term.

Indeed, the number crunchers expect earnings at BBA Aviation — which supplies flight support such as refuelling and ground handling, as well as aftermarket services to repair engines — to dip 2% in 2016.

But an 18% recovery is predicted for 2017 as the fruits of an improving US economy boost business jet activity. On top of this, BBA Aviation’s acquisition of Landmark Aviation in late 2015 should also turbocharge earnings in the coming years, a move that has significantly bolstered the firm’s footprint in North America.

And I reckon a forward P/E rating of 14.5 times is a decent level at which to tap into the plane play’s attractive growth story.

Toast spectacular returns

Beverages giant Diageo (LSE: DGE) has seen its bottom line take a pasting in recent years as anti-extravagance measures in China — combined with adverse currency movements — have hampered revenues performance.

And a continuation of these problems is anticipated to result in further earnings woes in the current period, a 1% fall is pencilled-in for the period ending this month.

Still, I reckon Diageo remains a great pick for those seeking slick long-term returns. The company is doubling-down on marketing and product investment to get sales firing again, particularly in the white-hot ‘premium’ segment where volumes are surging across the globe.

With shrewd acquisition activity also bolstering the Johnnie Walker manufacturer’s presence in lucrative emerging markets, I reckon Diageo is in great shape to build on a predicted 8% earnings advance in 2017.

I reckon a P/E rating of 21.1 times — while hardly eye-popping on paper — is great value for a company of Diageo’s calibre.

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 owns shares of and has recommended BBA Aviation. The Motley Fool UK has recommended Diageo. 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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