Finding shares which offer growth at a reasonable price is becoming more challenging. The rise of the FTSE 100 in the last year has meant that a number of growth stocks are now fully valued, or even overvalued. As such, buying the right stocks has become more difficult for long-term investors.
However, there are still a number of stocks which could offer profitable investment opportunities. These two shares could help to propel you towards a £1m portfolio by retirement.
Reporting on Friday was visitor attraction operator, Merlin Entertainments (LSE: MERL). The company’s first half results saw a rise in revenue of 9.6% at constant currency, with visitor numbers 6.2% higher than in the same period of the prior year. Like-for-like (LFL) sales were 3.7% up on last year, with the company benefitting from a strong contribution from new accommodation and attractions. There was particularly high growth from Legoland, where its parks revenue increased by 20.8% at constant currency.
Merlin is also making good progress towards its 2020 strategic milestones, with five new Midway attractions opening in the period. It has also opened 381 new accommodation rooms to date across four of its theme parks, while Legoland Japan opened ahead of schedule and on budget.
Looking ahead, Merlin is expected to post a rise in its bottom line of 15% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of just 1.3, which suggests it offers value for money. The company has significant geographical diversity, which could help to protect it from the risks of Brexit. It may also continue to benefit from a weak pound, while its strategy looks set to deliver high growth in future years.
Also offering an upbeat outlook for the long term is Whitbread (LSE: WTB). The Costa and Premier Inn owner has become a dominant player in the UK leisure sector. It has a high degree of customer loyalty which should help to protect it against a potential economic downturn over the next couple of years.
Alongside this, the company has significant international growth potential. It is slowly expanding the number of Premier Inn locations, while its move into China with Costa could be a positive catalyst on its earnings. The country is becoming more consumer-focused and there is expected to be a high-single-digit growth rate in demand for consumer goods, such as coffee, over the long run. Accessing this growth opportunity could be a shrewd move for Whitbread.
With it trading on a price-to-earnings (P/E) ratio of 15.8, it is not cheap compared to other travel and leisure sector stocks. However, given its mix of defensive characteristics due to its high degree of customer loyalty in the UK, and its growth potential in international markets such as China, it could be a stock which helps to propel your portfolio towards seven-figure status.
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Peter Stephens owns shares of Whitbread. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.