The recent rise in the FTSE 100 indicates that investors are feeling optimistic about the future. Clearly, there are risks present such as a new US President, Brexit and the continued slowdown in China. However, there are a number of stocks which are expected to post strong growth figures for the current year despite the challenges which exist for the world economy. Here are two examples of companies offering strong growth at a reasonable price.
A defensive consumer goods stock
Unilever (LSE: ULVR) is expected to grow its bottom line by 9% in the current year. This is around 50% higher than the growth rate of the wider index and while this is appealing, it’s the company’s consistency that marks it out as a worthwhile investment. For example, over the last five years Unilever has grown its bottom line in every year and looks set to continue to do so over the long run.
A key reason for this is the company’s diversification and exposure to fast growing emerging markets. It’s well spread throughout the world, so stronger performing regions can offset any challenges faced elsewhere. It’s also well placed in markets such as India and China, where rising wealth is causing a boom in demand for consumer goods. And with a high degree of customer loyalty, its sales should hold up better than most FTSE 100 companies even if the world economy endures a difficult period.
With a price-to-earnings (P/E) ratio of 19.1, Unilever isn’t among the cheaper stocks in the index. However, its price seems fair given its consistency and high growth potential over the coming years.
A turnaround stock
Aviva (LSE: AV) continues to perform a stunning turnaround since making a loss in 2012. It’s forecast to record a rise in earnings of 14% in the current year and could continue to beat the wider market growth rate over a longer period. Central to this is its combination with Friends Life, which has created a dominant life insurer. And with Aviva stating that Brexit is unlikely to significantly impact on its financial performance, it seems to offer a perfect mix of growth and defensive characteristics.
Synergies from the Friends Life deal should help to boost Aviva’s bottom line in future years. Its management has already delivered major cost savings and efficiencies that have left the company more nimble and able to adapt to change. Its price-to-earnings growth (PEG) ratio of 0.7 shows that its shares could deliver significant gains without becoming overvalued, while its yield of 5.3% indicates that it should enjoy high demand from income investors.
Furthermore, a dividend coverage ratio of 1.9 means that dividend growth could beat inflation. This would make the company an even more appealing option if the price level rises by the Bank of England’s forecast of 2.7% in 2017.
