While the FTSE 100 may not be as cheap as it was a number of years ago, there is still a wide range of shares that could be worth buying for the long term. Since the world economy is now growing at a fast pace, with the US and China having bright futures ahead of them according to forecasts, global consumer stocks could be worthwhile investments.
With that in mind, here is a FTSE 100 company which could generate improving financial performance. It may benefit from an operating tailwind, as well as from the changes it is making to its business model.
The company in question is Burberry (LSE: BRBY). It is currently undergoing a period of change which it is hoped will create a leaner and more focused business. While in the past it had sought to diversify its brand into a range of products and even different price points, it is now refocusing on its core luxury offering. This will entail a period of restructuring, but could lead to improved sales, a greater focus on areas where it enjoys a competitive advantage, as well as higher margins.
Alongside this, Burberry is also seeking to reduce costs in order to become increasingly efficient. Under a refreshed management and creative team, it seems to be making progress with its strategy changes. In the next financial year, for example, it is due to report a rise in earnings of 7%. And with it having exposure to fast-growing markets across the world, especially in emerging markets, its long-term investment potential appears to be impressive.
Clearly, a price-to-earnings (P/E) ratio of around 30 is relatively high even after a 10-year bull market for the FTSE 100. But with the company’s business model experiencing significant change, in the coming years it could justify a higher share price as profitability improves.
Also offering upside potential is operator of food and beverage outlets in travel locations across the world, SSP Group (LSE: SSPG). The company released a pre-close trading update on Wednesday for the period from 1 July 2018 to 30 September 2018. It has been able to trade in line with expectations in the fourth quarter of the year, with like-for-like (LFL) sales growing at a similar level to those recorded in the third quarter. It anticipates LFL sales growth of between 2% and 3% for the full year, with increased passenger numbers in the air sector being the key catalyst.
Net contract gains for the full year are expected to be at the top end of the previously announced range of 4.5% to 5%. The acquisitions of TFS in India and Stockheim are performing well. They are expected to add 1.5% to revenue for the full year.
With SSP Group expected to increase its bottom line by 18% this year and by a further 10% next year, it seems to be performing well. A price-to-earnings growth (PEG) ratio of 1.8 indicates that it could offer good value for money given its long-term financial prospects.
According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…
And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...
It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…
But you need to get in before the crowd catches onto this ‘sleeping giant’.
Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended Burberry. 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.