With the returns on Cash ISAs being lower than inflation in most cases, now could be the right time to purchase FTSE 100 shares. In many cases they offer improving financial prospects, as well as fair valuations.
Certainly, there are risks ahead for the index. Global economic challenges such as a trade war and geopolitical risks could remain threats during 2020. However, long-term investors may be able to buy high-quality businesses at low valuations today, since investor sentiment could be relatively cautious.
With that in mind, these two stocks could offer long-term growth that may make now the right time to buy them.
The recent quarterly update from Barclays (LSE: BARC) showed that the bank is making progress in delivering its strategy. Its cost:income ratio now stands at 62%, with the bank expecting cost reductions to further improve its efficiency. It is also investing in its digital capabilities as it seeks to keep pace with a fast-changing wider banking industry.
As with other banks that have UK operations, Barclays faces political risks in the short run. They could cause investor sentiment, as well as its financial performance, to come under pressure. However, with the stock having a price-to-earnings (P/E) ratio of 7.6, it seems to offer a wide margin of safety.
Furthermore, the bank is forecast to post a rise in its bottom line of 15% in the next financial year. This could catalyse investor sentiment, as well as its dividend. For example, next year it is expected to yield 5.7% from a dividend payout that is covered 2.4 times by profit. This suggests there could be further dividend growth ahead should the bank experience favourable operating conditions in the coming years.
Also offering long-term total return potential is FTSE 100 support services business Compass Group (LSE: CPG). The business recently reported strong full-year results that showed its performance in the US was especially encouraging. For example, it recorded organic revenue growth in North America of 7.7%, which contributed to overall growth for the business of 6.4% compared to the previous year.
Looking ahead, Compass Group is forecast to post a rise in its bottom line of 4% this year. This may seem rather disappointing when its P/E ratio of 20.6 is taken into account. However, the company has a solid track record of growth that has seen it report a rise in its bottom line in each of the last five years. As such, it could offer stability during an uncertain period for the world economy.
Furthermore, Compass Group is exposed to a wide range of geographies and markets. This could reduce its overall risk and provide its investors with a relatively smooth and sustainable rate of growth that produces a rising share price over the coming years.
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Peter Stephens owns shares in Barclays. The Motley Fool UK has recommended Barclays and 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.