I’m not tempted to buy into the firm, however, low valuation or not. The grocer’s share price has fallen 11% from its 2019 highs struck around 250p in late April and, judging from recent newsflow, there’s plenty of reason to expect it to keep falling.

Price hikes are coming

The sales renaissance which Tesco enjoyed up until fairly recently has well and truly run out of steam. Latest trading numbers showed sales growth more-or-less stagnate in the first fiscal quarter. That’s a reflection of expansion by its competitors and the mounting pressure on household budgets that’s exacerbating the rush to cheaper supermarkets such as Aldi and Lidl.

I expect recent news of price hikes will go down like a cup of cold sick for the customers that are still sticking by Tesco too, and worsen the current exodus. In the face of rising costs, it’s been forced to raise prices on some 1,000 goods across the store in the past couple of weeks, according to data seen by the Press Association, with prices going up by an average of 11% on a broad range of items.

The likes of Tesco find themselves in one of those dreaded Catch-22 situations: keep prices low and with them razor-thin margins; or increase them and lose even more loyal customers. The Footsie firm has opted for the latter, and it’s likely the price rises will keep coming given the probability that the pound will keep on sliding.

A better retail stock

So forget about those City predictions of handsome profit increases over the next couple of years, I say. It’s hard to see how Tesco will deliver on these estimates, and I expect them to be chopped back sooner rather than later and prompt a further slip in the share price.

I’d much rather use my hard-earned investment cash to buy Applegreen (LSE: APGN). The petrol forecourt retailer’s paper valuation, a forward P/E multiple of 16.9 times, might not be a million miles away from that of Tesco, but I believe their long-term profit outlooks are worlds apart.

Applegreen has made moving into overseas markets a critical part of its growth strategy in recent years. The Dublin-based business is spreading its tentacles into the UK and the US via a mix of organic expansion and game-changing acquisitions like that of Welcome Break in October.

Revenues are exploding as a consequence and, encouragingly, the AIM company has no plans to slow down on this front. Just last month, it acquired leasehold interests on 46 petrol stations in a move which marks its first major foray in the US Midwest.

City analysts expect Applegreen’s earnings to rise by double digits through the next couple of years too. But I reckon these forecasts are built on much safer foundations than those over at Tesco.

The post 1,000 more reasons why I’m avoiding the Tesco share price appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Applegreen and 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.

For investors seeking strong and sustained earnings growth for many years, it’s difficult to look past London’s quoted healthcare providers.

Those that specialise in keeping us alive and maintaining our wellbeing are a classic defensive play, with medicines and care demand remaining broadly resilient regardless of broader economic considerations. And thanks to population growth, the revenue opportunities of many of these businesses are improving year after year.

One such stock I’m tipping for greatness in the years ahead is Alliance Pharma (LSE: APH). Unlike most pharmaceutical plays — like GlaxoSmithKline and AstraZeneca, whose earnings visibility are not as strong thanks to the temperamental nature of drugs R&D — this business doesn’t have to worry about the impact of such setbacks as the drugs it acquires have already passed the often-painful development process.

What’s more, the treatment areas that Alliance Pharma concentrates on are relatively niche and with very little competition, provide profits estimates with that little extra visibility.

A long term lovely

Now new investors seeking exceptional earnings growth from the off are likely to be disappointed, with City analysts tipping a 12% fall in 2017.

That said, I would still consider now a terrific time to load up on the AIM-quoted business. Firstly, Alliance Pharma is expected to bounce back straight away from the aforementioned projected rare earnings dip with a 10% advance next year. And right now the medicines mammoth also deals on a pretty undemanding valuation, with the firm rocking a forward P/E ratio of 16.8 times.

This reading is also pretty reasonable when you consider the exceptional earnings possibilities created by Alliance Pharma’s commitment to acquisitions. It spent £16m on M&A action in 2017 alone to bolster its global footprint and, thanks to its strong balance sheet, free cash flow jumped to £21.7m last year, from £13m in the prior period. So investors can look forward to further earnings-driving buys in the years ahead.

Fuelled up

Applegreen (LSE: APGN) is another stock I’m tipping to thrive as it also splashes the cash to generate electric profits growth.

The AIM-listed stock, a major retailer at petrol stations in the Republic of Ireland, has spent a fortune on expansion in recent times and, as a result, the number of locations it operates from has leapt from 64 in 2009 to 342 just eight years later. And Applegreen’s growth strategy is also seeing it spread out onto foreign shores to boost its revenues possibilities still further.

Unlike Alliance Pharma, the Dublin company is not expected to endure any near-term earnings turbulence and it’s predicted by City analysts to generate a 5% bottom line improvement in 2018. And growth is expected to accelerate to 2019 next year as its expanded geographic presence delivers the goods.

Right now, Applegreen carries a forward P/E ratio of 23.3 times. This may be high but it should prove no barrier to further share price advances as the company’s market value has also swelled by more than a third over the past 12 months alone.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Alliance Pharma and AstraZeneca. 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.

The company’s sales and profits performance during January-June were certainly impressive, as was its decision to light a fire under the half-time dividend. And the AIM-quoted firm was at it again on Tuesday, its latest trading statement showing that demand for its product suite continues to ignite.

Make the connection

Gamma, which provides communications services to British business, declared that adjusted EBITDA for the full fiscal year is likely to beat market expectations. The company said that the likely beat “reflects a strong demand in the business market for Gamma’s portfolio of products,” adding that growth has been strong in all of its non-traditional products.

The Newbury-based business said that its SIP Trunking and Cloud PBX products “continued to grow ahead of the market,” while the past investment it has made in its broadband and ethernet products helped drive volumes here too. Moreover, Gamma also saw volumes across its mobile propositions growing last year as well.

To put the cherry on the cake, Gamma advised that its balance sheet has continued to strengthen, with its closing net cash balance clocking in at £31.6m versus £28.2m a year earlier. This clearly bodes well for further R&D investment as well as additional dividend growth (the firm hiked the interim dividend 12% back in September).

City brokers had been expecting earnings to have swelled 3% in 2017 prior to today, but this is on course for an upward revision following today’s update. And improving demand across the business is likely to see the predicted profits growth of 7% this year and 8% in 2019 get positive amendments too.

A forward P/E ratio of 28.5 times may be toppy on paper, but I reckon this is fair value given Gamma’s exceptional momentum.

Forecourt fave

I believe Applegreen (LSE: APGN) is another share those seeking strong and sustained profits growth need to zero in on today.

The petrol station retailer is already the biggest motorway service area operator in its home territory of Ireland, its focus on offering super-low fuel prices proving successful in drawing motorists through its store doors.

This success at home has seen Applegreen move its crosshairs overseas in the hunt for long-term earnings expansion. Indeed, the business has identified Britain and the US as hot growth markets, and it is rapidly building its footprint in these destinations through targeted M&A.

City analysts are therefore expecting earnings at Applegreen to keep growing at double-digit percentages — the AIM-listed business is expected to follow a predicted 17% profits advance in 2017 with a 13% rise in the present period. And in 2019 analysts expect the bottom line to swell by an extra 17%.

Now it could, like Gamma, be considered a little expensive for some, the firm rocking up on a prospective P/E ratio of 21.1 times. But this premium paper valuation is fully warranted given the brilliant profits potential of the retailer’s aggressive expansion strategy.

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Royston Wild has no position in any of the shares mentioned. 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.

You see, the telecoms titan’s formidable presence across developing and emerging markets gives it scope to generate terrific sales growth in the years ahead. And Vodafone is of course still ploughing vast sums into its global network to bolster voice and data capabilities across all its markets, following on from its recently terminated, multi-billion-pound Project Spring organic investment programme.

But the London business is not the only hot growth stock I would consider buying today, of course. Indeed, the latest trading statement from Applegreen (LSE: APGN) has got me pretty excited.

Profits pumping higher

And my enthusiasm for the petrol forecourt retailer is shared by the market. Applegreen rose 2% in Tuesday business to record peaks just shy of 520p per share, taking total gains since the start of 2017 to 44%.

The Dublin firm announced that revenues blasted 21% higher between January and June to €672.5m, a result that drove adjusted EBITDA to €16.6m, up 28% year-on-year.

Applegreen said that like-for-like food and store sales rose 5.4% in the period, underpinned by a strong economic backcloth and reflecting the impact of recent store rebrands and upgrades.

Celebrating the results, chief executive Bob Etchingham said: “This performance was underpinned by favourable fuel margins, very strong like for like growth in non-fuel revenues and margins together with continued investment in the expansion of the estate.

“We now have a good platform for growth in each of our three markets and are well positioned for the seasonally important second half of the year. Overall, we remain confident in the prospects for the business in 2017, ” he added.

Etchingham referenced the 32 sites Applegreen added to its estate in the first half, taking the total number to 275. Applegreen is the largest motorway service area in the Republic of Ireland, but is increasingly looking to the UK and the USA to drive further growth. Indeed, the company bought seven sites, most of which are on the A1 motorway, from Carsley Group for £21m last month. And looking Stateside, in July Applegreen bought 42 sites in South Carolina from Brandi Group for $5.4m.

Ring up a fortune

I believe these measures should set Applegreen up for handsome earnings growth in the near-term and beyond, and my optimistic take is shared by City analysts. This year, the retailer is predicted to print an 8% bottom line improvement, and growth is predicted to improve 18% in 2018.

While Applegreen may look expensive on paper – the firm sports a forward P/E ratio of 24.7 times, well above the widely-regarded value watermark of 15 times – in my opinion the prospect of hefty earnings growth in the coming years makes the business worthy of such a rating.

And I believe the same can be said for Vodafone. The mobile master is predicted to record a 2% earnings rise in the year to March 2018, and to follow this with a 19% improvement in fiscal 2019. As a consequence, the company boasts a prospective P/E ratio of 28.6 times. However, I reckon the huge sales opportunities thrown up by growing telecoms demand the world over makes the company worthy of this elevated rating.

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Royston Wild has no position in any of the shares mentioned. 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.

Growth and balanced returns

The firm describes itself as a specialist audio, visual and document solutions distributor to the trade market, dealing in products such as large format displays, projectors, digital signage, printers and scanners. Investing in distributors that trade between product manufacturers and the companies selling things to end users always appeals to me. Distributors tend to ride the fortunes of entire industries, responding to demand without the costly cut-and-thrust of dealing with end users.

During 2016, around 65% of the firm’s operating profit came from the UK and Ireland, 21% from Germany, 8% from Australasia and 6% from France. It seems clear that the firm has plenty of room to expand further internationally, and it has moved fast since raising around £24m (net) with the recent initial public offering (IPO) of shares. During September, the company used part of the proceeds to acquire two companies, which underlines the company’s organic and acquisitive growth strategy.

The strategy seems to be working. Revenue is up 17.8% compared to a year ago, adjusted operating profit ballooned 22.2% and adjusted earnings per share notched up 19.5%. In a sign that Midwich plans to deliver balanced returns for investors, the directors declared a maiden dividend of 8.62p and committed to a progressive dividend policy.

At today’s share price of 335p, the forward price-to-earnings (P/E) rating runs at just over 16 for 2018 and the forward dividend yield is around 3.6%. City analysts following the firm expect earnings to cover the payout around 1.7 times.

Rolling out in the UK and the US

Petrol forecourt retailer Applegreen (APGN) describes itself as Ireland’s largest motorway service area operator and it also enjoys a leading position in the Irish petrol forecourt sector. Last year around 71% of gross profit came from Ireland, 27% from the UK and 2% from the USA. The firm is seeing brisk progress in rolling out its offering in Britain, and the potential for growth in America looks vast.

Today’s full-year results are encouraging, with revenue up 9% compared to a year ago, net profit shooting up by 43% and diluted earnings per share ratcheting up 27%. The directors revealed their confidence in the firm’s prospects by declaring a maiden dividend of 1.25 euro cents.

The firm has three strands to its plan for growing the estate of forecourt convenience retail outlets — a “low fuel prices, always” price promise, intended to drive footfall to the stores, a “better value always” tailored retail offer, and a strong food and beverage focus, aiming to offer premium products and service to the company’s customers. 

The appeal of Applegreen’s offering is enhanced by strategic partnerships with brands such as Burger King, Subway, Costa Coffee, Greggs, Lavazza, Chopstix, Freshii and 7-Eleven, and the company also has its own brands in aCafé and Bakewell café.   

At today’s share price around 417p, the forward P/E rating for 2018 is just over 15 and the dividend yield runs at just over 0.4%. City analysts following the firm expect earnings to cover the payout around 16 times, suggesting the directors are keeping funds back to progress opportunities to grow.

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Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Of course, Anglo American’s share price rise isn’t solely due to an improved outlook for the wider mining sector. It’s also because the company is in the process of making multiple changes to its business model that should leave it in a far healthier position than it has been in recent years. For example, it’s reducing its range of operations and is in the process of selling off non-core assets.

Furthermore, Anglo American is seeking to become increasingly efficient and with its bottom line forecast to rise by 35% next year, now seems to be an excellent time to buy it for the long term.

Defensive star

Similarly, Diageo (LSE: DGE) offers excellent upside potential. That’s partly because it offers tremendous defensive prospects, with its top and bottom lines likely to keep growing by mid-to-high single-digits over the medium-to-long term. In an uncertain investment world where there are concerns about the macroeconomic outlook of the US, China and the EU, Diageo’s consistency could prove popular and cause its shares to be bid up over the coming months and years.

In addition, Diageo has real bid potential. That’s because it has a number of premium, market-leading brands in multiple alcoholic drinks segments such as Johnnie Walker in whisky, Smirnoff in vodka and Guinness in stout. For a rival firm, such products could be extremely valuable and while Diageo is hardly cheap with a price-to-earnings (P/E) ratio of 19.3, its shares could realistically see their rating rise over the long run if defensive growth stocks become popular.

Time to buy?

Meanwhile, shares in Applegreen (LSE: APGN) have made a disappointing start to 2016, with them being down 11% year-to-date. Looking ahead, the petrol forecourt retailer is expected to grow its bottom line by 26% in the current year and by a further 21% next year. Both of these figures have the potential to cause a step-change in investor sentiment towards the company and therefore its shares could begin to reverse their decline since the turn of the year.

Furthermore, Applegreen trades on a P/E ratio of 20.6 which, when combined with its growth forecasts, equates to a price-to-earnings growth (PEG) ratio of around 0.9. This indicates that now could be a good time to buy it and with it having a geographically well-diversified business model, its risk/reward ratio seems to be relatively appealing.

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Peter Stephens owns shares of Anglo American. The Motley Fool UK has recommended Diageo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.