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Forget a cash ISA! The Standard Life Aberdeen share price could help you to retire wealthy

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While the performance of Standard Life Aberdeen (LSE: SLA) has been disappointing in recent months, the company’s long-term investment potential appears to be sound. Greater efficiency and resilience following its merger could reduce risk, with growth potential in a number of key markets offering high returns over the long run.

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Improving outlook

The company in question is cloud computing specialist Iomart (LSE: IOM). It reported a pre-close trading statement for the six months to 30 September 2018, with the performance of the business being strong during the period. It has delivered profitability which is in line with expectations, with revenue and trading profit expected to be well ahead of the previous year.

Looking ahead, the company believes that cloud computing offers further growth potential. With a move to the cloud being more complex than ever, its skills and network could provide increasing value across the industry. Its broad customer base could help it to capitalise on the growth potential within cloud computing, while a significant sales pipeline could catalyse its financial performance.

With Iomart forecast to post a rise in earnings of 9% in the current year, followed by further growth of 12% next year, it seems to have a bright future. Despite this, it trades on a price-to-earnings growth (PEG) ratio of 1.9. This suggests that it may offer investment potential after a strong first half of the year.

Low valuation

As mentioned, Standard Life Aberdeen could offer long-term investment potential. It has a relatively low valuation at the present time, which suggests there is a margin of safety on offer. It is due to post a rise in earnings of 9% next year, which puts it on a PEG ratio of 1.6. For a FTSE 100 company operating in what remains a growing market, this suggests that investors remain cautious about its outlook.

Of course, the company is undergoing a period of change at the present time. It is seeking to restructure through asset disposals, while also delivering on the synergies which formed a key part of its recent merger. While this could create some weakness in its financial performance in the near term, ultimately it may lead to a stronger business over the coming years.

With a dividend yield of over 7.5%, it easily beats the return on the FTSE 100, which has a yield of around 4%. It is also ahead of inflation of 2.7%, while a cash ISA’s return of around 1% seems insignificant in comparison. As such, and with the potential for high capital returns in the long run, now could be the perfect time to buy Standard Life Aberdeen. Its risk/reward ratio appears to be highly enticing.

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Peter Stephens owns shares of Standard Life Aberdeen. The Motley Fool UK owns shares of Iomart Group. The Motley Fool UK has recommended Standard Life Aberdeen. 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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