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5 Stocks On The Cusp Of Stunning Returns: BT Group plc, United Utilities Group PLC, RSA Insurance Group plc, Berkeley Group Holdings PLC And Croda International Plc

BT

Shares in BT (LSE: BT-A) could gain a major boost from the company’s move into mobile telecoms. Certainly, the proposed £12.5bn takeover of EE is likely to put a strain on BT’s financial standing, with a rights issue seemingly likely, but it could also catalyse the company’s bottom line over the medium term.

That’s because it will make BT a true quad play operator (landline, broadband, pay-tv and mobile), which is set to become a major selling point as customers seek a better price and easier customer experience through having all of their media provided by one company. As such, now could be a great time to buy BT ahead of potential upgrades to its longer term growth prospects.

United Utilities

While there are currently no real bid rumours surrounding United Utilities (LSE: UU), it has an obvious attraction to a pension fund or infrastructure fund. That’s because it offers relative stability and a highly robust business model which, in the presently uncertain marketplace, could have major appeal.

Furthermore, United Utilities has recently agreed to its next five year plan with regulator, Ofwat, and this provides yet more certainty and earnings visibility to its investors. And, with a dividend yield of 4%, it continues to offer excellent income appeal, which when combined with the potential for bid rumours could push the company’s share price higher.

RSA

Things are about to improve significantly for RSA (LSE: RSA) in the current year. That’s because after two years of losses, the company’s rationalisation and restructuring plans are set to return it to a black bottom line, which could act as a catalyst on the company’s share price and help it to reverse the 17% underperformance versus the FTSE 100 during the last year.

And, with more changes to come, RSA is set to become leaner, more efficient and, ultimately more profitable. In fact, its bottom line is set to rise by 4% next year and, while this is less than the FTSE 100’s mid to high single digit growth rate, it could mean that RSA merits a higher price to earnings (P/E) ratio than its current 13.5.

Berkeley

The next two years are set to be very strong for Berkeley (LSE: BKG), with the UK house building sector remaining buoyant amid a low interest rate period. And, while a Labour-led government could hurt demand for Berkeley’s prime London properties as a result of its proposed mansion tax, demand remains very high that even if it does reduce somewhat, the company is still likely to meet its forecast earnings numbers.

In fact, Berkeley is expected to post earnings growth of 10% in each of the next two years. This makes its current rating of 10 seem very low, which means that its share price could soar over the medium to long term.

Croda

Today’s first quarter update from chemicals company, Croda (LSE: CRDA), shows that it is making excellent progress. In fact, its shares have jumped by as much as 4% as it has reported an increase in sales of 4%, with all of its divisions posting positive numbers in the first part of the year.

Looking ahead, Croda is expected to post gains in its bottom line of 8% in the current year, and a further 6% next year. These are generally in-line with the wider market’s growth rate but, with Croda having an excellent track record of growth (profit has increased by an average of 22% per annum in the last five years) and the prospects for the global economy being relatively upbeat, its share price could continue to move upwards as it has done in the last year, with it outperforming the FTSE 100 by 10%.

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Peter Stephens owns shares of Berkeley Group Holdings, RSA Insurance Group, and United Utilities Group. The Motley Fool UK has recommended Berkeley Group Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.