Today I am looking at three stock stars that are expected to deliver stunning earnings expansion beyond 2015.
Boosted by a solid uptick in the UK economy, banking behemoth Barclays (LSE: BARC) (NYSE: BCS.US) has seen its operations on the High Street bounce higher in recent times.
A change of focus to its less-risky retail divisions is clearly paying off handsomely, with revenues at its Personal and Corporate Banking and Barclaycard arms continuing to take off. Meanwhile, the fruits of its ‘Transform’ restructuring programme are aggressively stripping costs out of the business and improving its footprint in the red-hot internet banking arena.
Barclays has seen the bottom line fluctuate wildly since the banking crisis of five years ago. But City analysts expect 2014 to have marked a watershed year in the bank’s fortunes, and predict that the company will follow a 23% earnings improvement with further robust growth this year and next — advances of 27% and 18% are expected in 2015 and 2016 respectively.
Consequently Barclays currently changes hands on ultra-low P/E ratings of 8.6 times for this year and 7.4 times for 2016. Any reading below 10 times is generally considered too good to overlook.
To say that tech play Blinkx (LSE: BLNX) suffered an annus horribilis in 2014 would be something of an understatement. The business faced claims from Harvard professor Ben Edelman that its software — which allows users to find online videos more easily — artificially bloated hit counts, while concerns over slowing revenues during the summer cast further doubts over the company’s business model.
Still, Blinkx’s strategic switch from the fading Desktop format to Mobile appears to have reached an inflection point, and the company noted in December’s update that revenues and earnings have continued to grow from the summer’s lulls. The high-growth Mobile segment now accounts for a fifth of total revenues from around 1% a year ago.
The upheaval of this refocussing is expected to drive earnings sharply lower in the near term, and a 95% decline is currently pencilled in for the 12 months to March 2015. But the firm’s bottom line is anticipated to swell thereafter as revenues start to flow in, and growth to the tune of 308% and 38% is predicted for fiscal 2016 and 2017 correspondingly.
At face value, however, Blinkx could still be considered an expensive stock selection — the business carries P/E multiples of 40.8 times for 2016, although this falls to a much-improved 21 times for the following year. Still, I believe that PEG readouts of 0.1 and 0.6 for these years underline the company’s exceptional price relative to its growth prospects. Any figure below 1 is widely regarded a bargain.
Despite an intensifying price war across the country’s clothing sector, NEXT (LSE: NXT) continues to pull in the punters in their droves. After reporting sluggish autumn sales due to unseasonal weather patterns, the business reported last month that sales of full-price items rose 2.9% in the run-up to Christmas, a figure which came out at the top end of its guidance.
And I believe that the firm is in great shape to enjoy resplendent revenues expansion well into the future, boosted by a backcloth of low inflation and improving real wage growth in the UK putting more pennies in its customers’ pockets. Meanwhile, heavy investment in its NEXT Directory online and catalogue division should continue benefitting from surging e-commerce activity.
NEXT has been a reliable earnings generator for donkey’s years now, and the retailer is expected to clock up a further 9% advance for the year ending January 2015. And bolstered by its bubbly sales prospects at home and abroad, brokers expect the business to report growth of 9% in 2016 and 8% in 2017.
As a result, the clothes house deals on a P/E rating of 15.8 times for next year — a value of 15 times or under is regarded as attractive value for money — and this falls to 14.6 times for 2017. Given NEXT’s steady upward momentum and proud record of positive earnings revisions, I believe that the company is an exceptional selection looking for reliable earnings growth.
Royston Wild owns shares of Next. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.