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2 growth stocks for the long term

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Companies that are able to deliver high earnings growth generally become more popular among investors. After all, the business world is designed to enable profits to be made, and those companies which are relatively successful at doing so are likely to become increasingly in demand.

With that in mind, here are two shares with bright financial outlooks. They could therefore deliver improved share price performance in the long run.

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Positive performance

Reporting on Tuesday was business-to-business information, insight and events group Centaur Media (LSE: CAU). The company has experienced challenging headwinds in some of its markets, but has nevertheless performed in line with market expectations. It continues to make good progress regarding its cash collection and debtor reduction. Its transition away from print advertising is also progressing, with it set to represent less than 4% of total revenues in 2018. The company also announced the appointment of a new Chairman in its update.

Looking ahead to next year, the business is due to report a rise in earnings of 14%. This could help to improve investor sentiment in the stock after what has been a rather mixed number of years. And with it trading on a price-to-earnings growth (PEG) ratio of just 1.1, it appears to offer considerable upside potential.

In addition, Centaur Media also has a relatively bright outlook from an income perspective. It has a dividend yield that is currently in excess of 6%, and this could help to improve investor sentiment. Inflation has recently risen to 3.1% and with the prospect of an even higher rate in future, the company could be a sound means of overcoming a major to risk to investors in 2018.

Strong track record

Of course, investors may also begin to increasingly reward companies with a solid track record of growth as well as stocks that offer high levels of earnings increases. For example, food supplier Compass Group (LSE: CPG) has an excellent history of delivering high earnings growth, with its bottom line having risen in each of the last five years. In fact, its earnings growth rate has averaged over 11% during that time, which may appeal to investors ahead of Brexit.

Clearly, Brexit could prove to be a positive change for the UK economy. It may provide increased growth potential in the long run. However, in the short run it may mean added uncertainty as business and consumer confidence comes under pressure. This could make defensive shares such as Compass more attractive to investors, which could result in a higher rating being applied to the company’s shares.

With a price-to-earnings (P/E) ratio of just under 20, Compass Group may appear to be relatively expensive at the present time. However, with a defensive business model and a track record of consistent earnings growth, it could be a worthwhile share to hold given the macroeconomic uncertainty which may be ahead for UK investors.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Compass Group. 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.

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