Buying shares in companies with upbeat forecasts is a sound strategy for obtaining strong capital growth. Certainly, it can sometimes mean paying a little more than desired but, in the long run, high quality companies tend to deliver excellent share price performance, thereby making a slightly higher price at the time of purchase seem somewhat less important.
Of course, it is sometimes possible to buy stocks with bright futures at a very appealing price. One such example is housebuilder Barratt (LSE: BDEV). It reported a strong set of full-year results today, with its pretax profit rising by a very impressive 45% versus the previous financial year. A key reason for this was an increase in the number of completions from 14,838 in the previous year to 16,447 in the year being reported. Furthermore, the sale price per home also increased by 8.7% to £262,500, thereby providing a further boost to the company’s financial performance. And, with such strong results, Barratt has decided to pay a special dividend of 10p per share, which indicates that it has confidence in its future performance.
In fact, Barratt is expected to post earnings growth of 16% in the current year. That’s over twice the market rate and, with the company trading on a price to earnings (P/E) ratio of 12.2, it appears to offer excellent value for money.
Similarly, social housing and care specialist Mears (LSE: MER) is also due to rapidly grow its net profit. It is expected to rise by as much as 25% next year and, with the company having a P/E ratio of just 14.2, this equates to a price to earnings growth (PEG) ratio of just 0.5. This indicates that improved performance is on offer at a very reasonable price and, with Mears having an excellent track record of growth (its bottom line has risen in each of the last five years), it seems to offer a potent mix of growth, value and stability.
Meanwhile, technology company Laird (LSE: LRD) is expected to grow its net profit by 19% in the current year and by a further 11% next year. This rate of growth puts it on a PEG ratio of just 1.4, which indicates that its shares look set to continue the run that has seen them soar by 26% in the last year alone. In addition, Laird remains a relatively appealing income play (especially for a technology company; an industry in which generous yields are somewhat rare), with the company yielding 3.4% from a dividend that is covered almost twice by profit.
This yield is, of course, still some way behind that of AstraZeneca (LSE: AZN). It presently yields a very enticing 4.2% and, with earnings growth expected to be positive over the medium term, now could be a great time to buy a slice of the company. Certainly, its P/E ratio of 15.6 may be higher than the ratings of many companies listed on the FTSE 100 but, with an improving pipeline, a very sound balance sheet and the right strategy that focuses on acquisitions, AstraZeneca seems to have a very bright future and could prove to be a star performer.
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Peter Stephens owns shares of AstraZeneca, Laird, and Mears Group. 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.