Finding FTSE 100 shares which offer a mix of growth, value and income potential is tough. That’s especially the case when the index is trading towards the upper end of its historical range.
However, the Tesco (LSE: TSCO) share price appears to offer those three attributes at the present time. It seems to have a sound strategy which could lead to a rising bottom line, while its valuation also suggests it may offer a margin of safety.
Of course, it’s not the only stock which could have investment potential. Releasing news on Wednesday was Dalata Hotel Group (LSE: DAL), which seems to have a bright future. Together, the two companies could help an investor to overcome a State Pension that, on its own, seems to be inadequate versus the current cost of living.
Ireland’s largest hotel operator said this morning it has exchanged contracts to acquire the long leasehold interest of a hotel under development in London for a total consideration of £91m. The transaction is conditional on the completion of the hotel to an agreed specification, with it expected to be operational towards the end of the current year.
The news appears to have been well-received by investors, with the company’s share price rising by over 2%. It provides the business with a presence in a key central London location which is likely to experience high demand over the long run.
With Dalata expected to post a rise in earnings of 4% this year, and 14% next year, its investment prospects appear to be upbeat. Despite this, it trades on a price-to-earnings growth (PEG) ratio of 1.1, which suggests its capital growth potential is high. As such, now could be the right time to buy it for the long term.
The prospects for the Tesco share price also appear to be upbeat. The company’s strategy seems to be providing it with an improving growth rate, with areas such as investment in fresh produce, customer service initiatives, and a ruthless focus on cost control helping to refocus the business on its core areas.
This, in turn, seems to be providing it with a competitive advantage versus peers following a long period of diversification which saw the company take its eye off the UK grocery space in favour of non-core opportunities such as technology.
Looking ahead, Tesco is expected to post a rise in earnings of 19% this year, followed by further growth of 20% next year. It trades on a PEG ratio of 0.8, which indicates that it offers growth at a very reasonable price.
Dividends are due to rise by 43% next year, which puts the stock on a forward yield of around 3%. Since payouts are expected to be covered 2.2 times by profit, they seem to be highly affordable. As such, the company could become a solid income play, with capital growth potential high due to its low valuation and expected earnings growth.
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Peter Stephens owns shares of Tesco. The Motley Fool UK has recommended Tesco. 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.