2 great ‘safety’ shares for growth investors

Road-barrier manufacturer Hill & Smith (LSE: HILS) has long proved to be a great pick for those seeking dependable earnings expansion.

The company has seen its bottom line swell at an annualised rate of 11.2% during the past five years alone. And with the UK government steadily stepping up investment in the country’s road network, demand for Hill & Smith’s products looks set to keep riding higher.

Indeed, Hill & Smith’s full-year trading statement released on Wednesday was treated with plenty of fanfare, a 6% share price advance pushing the stock to three-month peaks. Hill & Smith advised that revenues blasted 16% higher during 2016, to £540.1m, which is the company’s best result on record. And this propelled pre-tax profit to £68m, up 28% year-on-year.

Celebrating the results, chief executive Derek Muir commented that “our performance continues to be underpinned by our tried and tested strategy of international diversity together with the leading positions our businesses hold in their respective markets.”

And with infrastructure investment still rising, Muir added that “despite political and macro-economic uncertainties, 2017 is again expected to be a year of progress.”

City brokers certainly share my bullish take on Hill & Smith, and have chalked in earnings growth of 5% and 3% in 2017 and 2018 respectively.

Subsequent P/E ratios of 17.5 times and 17 times sail above the benchmark of 15 times regarded as conventionally good value. Still, I reckon investors should give short shrift to these slight premiums considering the company’s robust revenues outlook at home and abroad.

Brand heavyweight

Unilever’s (LSE: ULVR) vast portfolio of products can be matched by few others.

It is the immense diversity and pulling power of labels from Walls ice cream and Flora margarine through to Dove soap that tempted Kraft Heinz to make its mammoth $143m takeover bid last month, and it could well encourage the US giant to return sooner rather than later following this first rejection.

Despite experiencing a sales deceleration during 2016, the strength of Unilever’s brands still helped the group’s like-for-like sales grow 3.7% during the 12 months. And the business continues to throw huge sums at product innovations and brand roll-outs in new territories to keep sales on a northward tilt.

Such an approach has already delivered steady earnings growth at the London business, allowing the top line to keep growing despite pressure on shoppers’ wallets. And the number crunchers have slated further expansion in the medium term at least — rises of 10% in 2017 and 9% in 2018 are currently expected.

Like those of Hill & Smith, these figures create slightly-toppy P/E ratios of 22.5 times and 20.7 times respectively. But I reckon the evergreen allure of Unilever’s, added to the protection afforded by the manufacturer’s huge geographic footprint, more than warrant such high figures.

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Royston Wild 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.