Over the last three years, shares in storage company Big Yellow (LSE: BYG) have doubled. That’s stunning growth and it could be repeated. Certainly, it may take more than just over three years to do so, but Big Yellow has the potential to deliver 100% returns in the long run.
A key reason is its dominant position within the Greater London storage market. Although it’s by no means a monopolistic market structure, Big Yellow commands a relatively high level of brand awareness in what’s a rapidly growing sector. With the population of London and the south east continuing to soar, demand for storage space is likely to rise and Big Yellow could be a major beneficiary.
With Big Yellow forecast to grow its bottom line by 12% in each of the next two years, it remains an exceptional growth stock. In fact, if this rate was to continue over the next five-and-a-half years and Big Yellow maintained its current rating, it would cause a rise in the company’s share price of 87%. Add to this an annual yield of 3.6% and the total return could be over 100% in little over five years.
Similarly, shares in British American Tobacco (LSE: BATS) have doubled in recent years. However, unlike Big Yellow Group they’ve taken around six years to do so. Looking ahead, 100% total returns could be on offer since British American Tobacco continues to deliver relatively high and resilient earnings growth. For example, in the next two years it’s forecast to increase its bottom line by 8.5% per annum and assuming this continues in the next six years, it will be sufficient for a share price rise of 63%.
However, that assumes no change in the company’s price-to-earnings (P/E) ratio of 18.1. With a number of consumer goods companies trading on P/E ratios of well over 20 (such as Unilever and Reckitt Benckiser, which have P/E ratios of 22.4 and 24.9, respectively), British American Tobacco could warrant a higher valuation. If it was to trade on a P/E ratio of 20, it would equate to an additional return of 10%. When this is added to a yield of just over 4% in each of the six years (i.e. a total income return of 27%) it means a total return of 100% over the next six years.
Meanwhile, AstraZeneca’s (LSE: AZN) share price also could double over the medium-to-long term. Perhaps surprisingly given recent patent woes, its shares are now trading twice as high as eight years ago. Looking ahead, it may take the company less time than that to double again since it has a bright future resulting from the investment it made in buying other companies and treatments through which to counter its patent cliff.
In fact, AstraZeneca has repeatedly said it expects sales to double by 2023. While this won’t guarantee a doubling of its share price, it should go a large part of the way towards doing so, as investor sentiment is likely to improve if the company can deliver. And with AstraZeneca having a yield of 4.7%, the income return alone in that seven-year period could equate to as much as 38%. As such, and while the path to 100% returns may be less clear than for Big Yellow or British American Tobacco, AstraZeneca could still repeat its share price performance of the last eight years in the long run.
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Peter Stephens owns shares of AstraZeneca, Big Yellow Group, British American Tobacco, and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended AstraZeneca and Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.