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2 shares with explosive growth potential

Shares in insurance giant Prudential (LSE: PRU) have steamed higher in Tuesday business, after the firm’s latest financial statement underlined the huge potential of its Asian marketplaces. The financial favourite was last dealing 3% higher from Monday’s close.

Asia powering up

Prudential announced that group-wide operating profit clocked in at a whopping £4.26bn last year, up 7% from 2015 levels and setting a fresh record  Lauding the results, chief executive Mike Wells commented that “our performance has been driven by Asia, which has delivered a seventh consecutive year of double-digit growth in new business profit.”

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New profits from the region surged 37% in 2016, up to £2.03bn, a result that drove total Asian operating profit 28% higher to £1.64bn. And Prudential has seen momentum pick up in recent months, with quarterly annual premium equivalent (APE) sales in Asia breaching the £1bn marker for the first time during October–December.

Asia is undoubtedly the jewel in The Pru’s crown, but today’s results also indicated the strength of the company’s other global operations. Indeed, the insurer saw operating profit at its US Jackson division rise 20% last year, to £2.05bn.

And the City sees no reason for the bottom line at Prudential to stop pounding higher. Indeed, brokers have predicted earnings expansion of 14% and 8% in 2017 and 2018 alone.

These figures result in P/E ratios of just 12.7 times and 11.7 times, well below the forward average of 15 times for the broader FTSE 100.

I reckon this is a steal given Prudential’s exceptional growth potential, as its expanding presence in Asia latches onto favourable demographic trends like booming population growth and increasing personal income levels.

Pills powerhouse

Likewise, I reckon GlaxoSmithKline (LSE: GSK) is in great shape to deliver excellent earnings growth in the near-term and beyond.

The global geographic diversification of the medicine giant’s operations helps to mitigate the impact of macroeconomic bumpiness in one or two regions. And the essential nature of GlaxoSmithKline’s products provides it with an extra layer of earnings protection in the event of broader economic problems.

Besides this, while GlaxoSmithKline remains haunted to some extent by major patent expirations like that of Advair in the US, the company’s pumped-up pipeline is consigning the worst of these revenues hits to history.

Indeed, the company saw new product sales more than double in 2016, to £4.5bn. And GlaxoSmithKline has plenty more potential earnings drivers up its sleeve, and now expects sales of its New Pharmaceutical and Vaccine products to hit £6bn per annum at constant exchange rates by 2018. This’s two years ahead of its earlier estimate.

The number crunchers expect GlaxoSmithKline to throw out earnings growth of 9% in 2017 and 3% next year, projections that create P/E ratios of just 15 times and 14.7 times for this year and next. And I reckon investors can look forward to bottom line growth bulging further out as the next generation of sales stars hit the shelves.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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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