As with most insurance stocks, Amlin (LSE: AML) is not the most stable of companies. In fact, during the last five years it has slipped into loss-making territory in one year and its bottom line has been highly volatile in the others. Still, in the long run, its bottom line should yield impressive results and, with shares in the company having a beta of just 0.6, they could offer a less volatile shareholder experience than many of its sector peers – particularly in the short to medium term.
In addition, Amlin trades on a price to earnings (P/E) ratio of just 12.6, which indicates that there is upside potential while the FTSE 100 has a P/E ratio of 16. Furthermore, a dividend yield of 5.5% remains one of the highest in its sector, thereby further increasing Amlin’s appeal.
While Bellway (LSE: BWY) is an appealing income stock at the moment due to its yield of 3.5%, it could become much more enticing over the medium to long term. That’s because it has a payout ratio of just 33%, which is very low given that it is a financially sound business operating in a mature market.
Of course, the house building sector endured a tough period in recent years, with the credit crunch hurting bottom lines across the industry. However, with interest rates set to remain low, the future for Bellway looks bright and it could afford to pay out a greater proportion of profit as a dividend in future. As such, its income appeal looks set to increase, which could substantially improve investor sentiment and push Bellway’s share price much higher.
With growth in emerging markets continuing to be strong and the macroeconomic outlook for the developed world improving, Ted Baker (LSE: TED) looks like a great buy at the present time. In addition, its brand is becoming stronger, and there remains considerable scope for it to increase its price point and also diversify its product offering so as to become a true lifestyle brand.
So, while Ted Baker does trade on a P/E ratio of 29.1, it has an excellent long term growth outlook. In fact, its two-year price to earnings growth (PEG) ratio of 1.5 indicates that its current price is very reasonable given its strong earnings outlook.
Tate & Lyle
Despite a profit warning in early February that caused its share price to tumble by almost 20%, Tate & Lyle (LSE: TATE) is still slightly ahead of the FTSE 100 since the turn of the year. That’s an impressive performance and a key reason for this is the appeal of the company’s dividend. In fact, it now stands at a very enticing 4.5%, with dividends per share expected to rise by 3.8% next year.
Of course, Tate & Lyle’s bottom line progress is rather disappointing, with net profit set to grow by just 5% this year and 6% next year. However, the company remains financially sound, with strong cash flow and, in the long run, has the ingredients to deliver upbeat earnings numbers.
Even though the outlook for challenger banks remains challenging, as they seek to break into an oligopolistic market structure where the incumbents hold tremendous size and scale advantages, Virgin Money (LSE: VM) seems to be worth investing in. That’s because it is forecast to post strong earnings growth numbers over the next couple of years, with its bottom line expected to rise by 54% next year, for example.
And, with Virgin Money trading on a P/E ratio of 18.8, this equates to a PEG ratio of just 0.2, which indicates that while its future is likely to be something of a roller-coaster, with relatively high levels of volatility, Virgin Money could post excellent capital gains.
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Peter Stephens owns shares of Amlin, Bellway, and Tate & Lyle. 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.