Today I am looking at the growth prospects of three FTSE-quoted bruisers.
A chipper stock star
Following tech giant Apple’s (NASDAQ: AAPL.US) hair-raising results on Tuesday, investor attention has unsurprisingly switched to members of the Cupertino company’s supply chain. Consequently ARM Holdings (LSE: ARM) has seen its share price dip 2.5% in Wednesday trading, the microchip builder of course a critical parts supplier for Apple’s hardware.
The American business saw sales of its earnings-driving iPhone edge just 0.4% higher between October and December, to 75.8 million models. And demand for its iPad tablet PC — another critical area for ARM Holdings — slumped by almost a quarter to 16.1 million units.
The problem of market saturation is clearly cause for major worry for ARM Holdings looking ahead. But smartphone and tablet demand is still growing, of course, and the Cambridge firm’s market-leading hardware should keep it a step ahead of the competition, in my opinion.
On top of this, ARM Holdings’ growing role in the servers and networking segment also provides the firm with plenty of growth opportunities, particularly in the white-hot Chinese marketplace.
The City expects the chipbuilder to enjoy a 14% earnings bounce in 2016, leaving it changing hands on a P/E rating of 32.6 times. Such a figure may be too heady for some, however, given the rising risks in its key markets. But I believe ARM Holdings will continue to prove a lucrative stock pick for brave investors.
A defensive darling
But for investors with lower risk tolerance, I believe Bunzl (LSE: BNZL) could prove just the ticket.
The company offers a wide range of services and products, from carrier bags and coffee cups through to bandages and plastic gloves, all of which can be considered ‘essential’ regardless of the impact of wider economic pressures. And of course Bunzl is not dependent upon one critical sector in order to keep earnings moving skywards.
This model has enabled Bunzl to keep the bottom line expanding at a reliable rate for donkey’s years, and the number crunchers do not expect this trend to cease any time soon.
The London firm is anticipated to follow a projected 3% advance in 2015 with a further 5% earnings bump in 2016, leaving the business dealing on a P/E rating of 20.4 times. I believe this represents decent value given the firm’s strong defensive qualities, not to mention the huge opportunities created by its acquisition-led growth strategy.
Construct colossal returns
I am also hugely bullish over the earnings outlook for Crest Nicholson (LSE: CRST) as the UK’s housing crisis looks set to rumble on.
Britain’s housebuilders were some of the best performing stocks in 2015, as languid housebuilding activity, and a rising reluctance on the part of potential homesellers to advertise their properties, pushed prices relentlessly higher. At the same time a combination of improving buyer affordability, favourable lending conditions and government ‘Help To Buy’ initiatives blew demand through the roof.
All of these factors look set to keep driving home values steadily higher in 2016 and beyond, in my opinion, a promising omen for the likes of Crest Nicholson. The business advised just yesterday that forward sales were up 28% as of mid-January, at £511.8m, and that 37% of this year’s forecasted sales have already been secured.
The City expects Crest Nicholson to enjoy a 20% earnings surge in the 12 months to October 2016, leaving the business dealing on a bargain-basement P/E rating of 9.3 times. I believe the housebuilder is far too good to pass up on at these prices.
