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Are Vodafone Group plc, Gooch & Housego plc and Impellam Group plc set to post stellar returns?

Investor sentiment towards Vodafone (LSE: VOD) remains very upbeat, with the communications company recording a rise in its share price of 7% in the last three months. This is well ahead of the FTSE 100’s rise of 2% during the period and could be a result of the market gradually pricing-in an improved outlook for Vodafone.

Looking ahead, it’s expected to record an increase in its bottom line of 18% in the current year, followed by a further rise of 29% next year. Clearly, this rate of growth represents a step change for Vodafone following the fall in its bottom line of 9% last year. It seems to be at least partly because of the investment that Vodafone has made in its network and also in acquisitions across Europe. And with the Eurozone experiencing a period of quantitative easing, Vodafone’s vast exposure to Europe could be about to gain a boost for not just the next two years, but over the long run too.

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Growth already pencilled-in

Also posting share price gains of late has been Gooch & Housego (LSE: GHH), with the photonic technology provider recording a rise in its valuation of 18% in the last year. While this has been good news for the company’s investors and Gooch & Housego has been able to grow its earnings by at least 11% per annum in the last three years, it now appears to be rather expensively priced. As such, its share price could come under a degree of pressure.

In fact, Gooch & Housego now trades on a price-to-earnings (P/E) ratio of 22.3 and while it’s forecast to post further growth in each of the next two years, its earnings are set to rise at a rather modest pace. For example, growth of 2% this year and 6% next year is being pencilled-in by the market and this may fail to act as a positive catalyst on Gooch & Housego’s share price over the medium term.

Geographical diversification

Meanwhile, recruitment and staffing solutions specialist Impellam (LSE: IPEL) could deliver exceptional returns in the long run. A key reason for this is its high degree of geographical diversification, with it operating in the UK and rest of Europe, Asia, Africa and North America. This means that its profitability is unlikely to be hit hard by weakness in one particular region and with there being a real possibility of Britain leaving the EU, geographical diversification could be a useful ally in the coming months.

With Impellam forecast to increase its earnings by 13% next year, investor sentiment could improve. That’s especially the case since it trades on a price-to-earnings growth (PEG) ratio of 0.5, which shows that there’s considerable upside potential.

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Peter Stephens owns shares of Vodafone. 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.

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