The near-term outlook for Vodafone (LSE: VOD) may appear to be relatively uncertain. The company recently announced that its CEO will depart in October after 10 years in the job. During that time, he has been able to turn the company into a more diverse and sustainable growth opportunity, with its forecasts over the next couple of years being positive.
As such, many investors will argue that he will be missed. However, with the stock offering a wide margin of safety and a sound strategy, it seems to have upside potential. Alongside a FTSE 100 peer, outperformance of the wider index could therefore be ahead.
With Vodafone having focused on expanding its products and services in recent years, it seems to be in a strong position to offer a more sustainable growth outlook. Part of its strategy has been to engage in M&A activity, with its latest acquisition being Liberty Global’s cable assets in Germany and Central and Eastern Europe. This will help to challenge dominant incumbents in those markets and could provide a growth catalyst over the medium term.
The company has also maintained a high level of investment in its network quality, which has helped to boost its operational performance. The impact of its investment on earnings growth is set to be significant, with net profit forecast to rise by 22% in the next financial year. This puts the stock on a price-to-earnings growth (PEG) ratio of just 0.9, which suggests that it offers a wide margin of safety.
As well as its capital growth prospects, Vodafone also remains a solid income play. Its dividend yield currently stands at over 6%. And with shareholder payouts expected to rise by 4% in the next financial year, it could offer a real-terms rise in income for its investors. Furthermore, with the company continuing to diversify into new regions and new business segments, it could provide a sound and sustainable income growth outlook over the medium term.
Also having the capacity to beat the FTSE 100 in 2018 is gold miner Randgold Resources (LSE: RRS). The company is expected to deliver a bottom line increase of 13% in the current year, followed by further growth of 10% next year. This could boost investor sentiment towards the stock. And while investor sentiment may be upbeat towards the wider index at the present time, history shows that volatility is likely to return over the medium term.
In such a scenario, gold miners could prove popular. Gold is still viewed as a defensive asset. Since inflation is expected to rise across the globe in future years, it could become increasingly in-demand as a store of wealth.
With Randgold Resources expected to have a dividend yield of 4.7% next year, it seems to provide a strong income outlook. With a large net cash position, its development potential remains high, while a solid track record of improving operational performance could mean it has an attractive risk/reward ratio.
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Peter Stephens owns shares of Randgold Resources Ltd. and Vodafone. 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.