3 top consumer stocks for growth: Unilever plc, Whitbread plc and Poundland Group plc

With forecasts showing corporate earnings growth slowing to a 7-year low, finding growth stocks has increasingly becoming a difficult task. Nevertheless, I screened the market for near term revenue and earnings growth and found these three consumer stocks:

1. Unilever

With its global reach and excellent product diversification, Unilever (LSE: ULVR) is a top-quality growth stock. Management has a great track record of delivering steady year-on-year earnings growth, and the company’s wide economic moat is reflected by its impressive 14.8% operating margins.

City analysts expect Unilever’s underlying earnings per share to grow by 13% this year, and a further 7% in 2017. What’s more, the stock has a tempting dividend. Its shares currently yield 2.8%, but steady dividend growth could see its prospective dividend yield grow to 3.4% by 2017.

Trading on 21.6 times forward earnings, the stock is not cheap, but Unilever is a perennial out-performer and quality stocks are always more expensive. Nevertheless, I’m still waiting for shares to dip below 3,000p before investing.

2. Whitbread

You may still think of Whitbread (LSE: WTB) as primarily a brewing company, but its beer-making days are long behind it. However, I’m sure you’ll recognise several of the company’s current brands, which include Premier Inn, Costa Coffee, Beefeater and Brewers Fayre.

Shares in Whitbread have dropped 11 percent since the beginning of the year, following results of weaker than expected like-for-like sales growth of 3% in 2015. However, the revenue slowdown was mainly related to one-off weather and seasonal factors, and management is sticking to its 2020 growth targets. By 2020, the company plans to increase its number of hotel rooms by nearly a third, and increase Costa sales by almost 60%.

On a valuation perspective, Whitbread trades at a forward P/E of 15.4. This seems very attractive given that the average forward P/E in its peer group is currently 18.1, while its 3-year historical average forward P/E is 21.0. Underlying EPS is forecast to grow 4% this year, and 10% in the following year.

3. Poundland

Poundland (LSE: PLND) just had a rough quarter. Like-for-like sales fell 3.9% in the fourth quarter and trading losses from its troubled acquisition of 99p Stores are forecast to drag underlying EPS for the full year 37% lower than last year.

However, the earnings impact is only expected to be temporary, and the outlook for growth in the discount retail sector remains robust. In the longer term, Poundland’s acquisition of 99p Stores should see it emerge as a more dominant player in the sector. Its greater scale should help the combined company to negotiate better deals with suppliers and enable it to expand its product range, which would in turn drive higher sales and improve margins.

Shares in Poundland have fallen 48% over the past year, and it currently offers a dividend yield of 2.7%. The company has an estimated P/E of 20.8 for this year, but forecasts of a rebound in underlying EPS growth of 59% in 2016/7 could see its forward P/E drop to a very reasonable 12.3 times.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.