While it’s always great to buy shares that offer top-notch value for money and that pay great yields, growth stocks can still play a key role in investors’ portfolios. That’s because, while often riskier, they can make the biggest positive contribution to retirement planning, mortgage repaying and increased wealth of any type of company — especially when they are bought at reasonable valuations.
With that in mind, here are three companies with growth potential that look good value right now.
Despite there being a seemingly continuous flow of bad news, Barclays (LSE: BARC) (NYSE: BCS.US) has huge growth potential. Indeed, while the media focuses on the latest allegations at the bank surrounding dark pools, growth investors are looking further ahead. That’s because Barclays is forecast to post earnings per share (EPS) growth of 32% in the current year and 26% next year. That means that in 2015 its profits could be two-thirds higher than they were in 2013, which would be a very impressive growth rate. With shares in Barclays trading on a price to earnings (P/E) ratio of just 10, they appear to offer growth at a very reasonable price.
ARM (LSE: ARM) (NASDAQ: ARMH.US) continues to be the UK’s pre-eminent technology company. Indeed, a glance at its expected growth rate in EPS soon tells us why. ARM is forecast to deliver bottom line growth of 11% in the current year and 23% next year. Certainly, ARM shares trade on a high P/E multiple of 36, but when this is combined with the company’s forecast growth rate it yields a price to earnings growth (PEG) ratio of 1.6, which is historically fairly low for ARM. Furthermore, the company offers greater stability than many of its technology peers, for which a premium seems deserved.
With shares in easyJet (LSE: EZJ) having pulled back in recent weeks, they now offer great value as well as strong growth prospects. Indeed, EasyJet trades on a P/E of just 11.7, which is considerably lower than the FTSE 100’s P/E of 14. Furthermore, EasyJet is set to post double the wider index’s growth over the next two years, as its bottom line is due to rise by 12% this year and by 12% next year. This puts EasyJet on a PEG of less than one, which is very attractive and shows that the stock could deliver strong gains in future.
Peter Stephens owns shares of Barclays. The Motley Fool has recommended shares in ARM Holdings.