One such company is alcoholic beverages business Diageo (LSE: DGE). Its share price has declined by 7% in the last three months, which suggests it may now offer better value for money. Alongside another stock, which reported robust performance on Friday, it could be worth buying for the long term.

Robust performance

The company in question is specialist social care provider CareTech (LSE: CTH). It released a full-year trading update that showed it has performed in line with expectations. Net capacity in residential and supported living increased from 2,534 places a year ago, to 2,622 places. Occupancy levels have remained at 93%, while staff turnover has remained below the industry average, at 22%. The company’s care ratings have risen during the year, while annual fee negotiations with local authorities have also led to positive outcomes.

Looking ahead, the recent acquisition of Cambrian could act as a catalyst on the company’s performance. It seems to be a highly-complementary business which could help to support CareTech’s strategic goals.

With the company trading on a price-to-earnings (P/E) ratio of around 11, it could offer good value for money at the present time. Given its near-50% rise in dividends per share in the last five years, it could also have income growth potential – especially since its dividend yield of 2.7% is due to be covered 3.5 times by profit in the current year.

Growth potential

The growth prospects of Diageo continue to be relatively robust. Certainly, fears surrounding the wider global growth outlook are a concern for the business. Rising US interest rates and the prospect of further tariffs could lead to further share price weakness in the near term. However, with the company enjoying a high degree of customer loyalty, and alcoholic beverages having relatively stable demand in a variety of economic conditions, the long-term outlook for the business seems to be positive.

Diageo is focusing on improving its efficiency, and this is expected to contribute to a rise in earnings of 7% in the current financial year. Although it has a P/E ratio of around 21, the company’s rating could move higher over the coming years. Its mix of growth potential from emerging markets, and its established position in more mature markets, could provide an enticing risk/reward ratio over the long run.

As such, and while further share price falls cannot be ruled out, the investment potential of the stock seems to be high. It appears to have defensive growth prospects that could help it to outperform the FTSE 100 over the long run.

The post Why I feel the stock market crash could be an opportunity to buy FTSE 100-member Diageo appeared first on The Motley Fool UK.

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Peter Stephens owns shares of Diageo. The Motley Fool UK has recommended Diageo. 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 retirement home operator — which has gained almost 40% in value since the start of 2017 — has hit peaks of 440p per share today. And I believe CareTech trades on ultra-low valuations that should facilitate further gains

The Potters Bar-based business advised that revenue increased 11.3% during October-February, to £78.8m, a result that pushed underlying pre-tax profit 13.9% higher to £13.1m.

Additionally, in a separate release CareTech advised that it had closed out a further acquisition since the half year’s end. The firm has snapped up specialist residential care provider Selborne Care for £16.9m. The latter operates 57 beds across eight sites in the Midlands and South West of England.

Take care

And CareTech is not done yet on the M&A front, executive chairman Farouq Sheikh commenting today that “a number of potential acquisition opportunities are under active consideration and in addition we have a strong organic pipeline of additional beds in reconfigured services and in new services.”

The need for social care is a growing phenomenon, with Britain’s rapidly-ageing population increasing the demand for CareTech’s services. This backcloth naturally bodes well for the company’s long-term earnings outlook, and the business is aiming to make the most of this trend through its aggressive acquisition drive.

The City expects it to endure some earnings woe in the near term, and predictions of a 10% fall in the year to September 2017 would put the company’s long record of bottom-line growth to the sword.

Still, this drop is forecast to be a mere hiccup, and CareTech is expected to get firing again as soon as next year, and a 3% advance is currently predicted.

And I reckon a prospective P/E ratio of 12.8 times is attractive value given its positive outlook.

Furthermore, CareTech’s progressive dividend policy adds an extra sweetener for investors. Last year’s 9.25p per share reward (up 11.6% year-on-year) is expected to step to 9.6p this year and to 10.1p in fiscal 2018, figures that yield 2.1% and 2.3% respectively.

Global star

Recruitment firm SThree (LSE: STHR) is also in great shape to generate strong earnings growth, in my opinion.

It announced last week that gross profit edged 2% higher during December-May, with the bottom line gaining momentum during the final quarter when profits leapt 4%.

Not only does the company’s emphasis on the contract sector continue to pay off (profits here rose 8% in the first half), but its broad geographic wingspan is also keeping profits on an upward trajectory — profits generated in the US jumped 16% in the period, and in mainland Europe these rose 7%.

The number crunchers certainly believe earnings should keep rolling higher, and have chalked in rises of 2% and 15% for the years to November 2017 and 2018 respectively.

These estimates leave the business dealing on a decent forward earnings multiple of 14.3 times, but this is not the only good news as the staffing specialist also offers great value for dividend chasers. Predicted dividends of 14p for this year and next result in a market-busting yield of 4.5%.

I reckon SThree, like CareTech has what it takes to deliver knockout returns in the coming years.

The post 2 hot value stocks that could make you rich appeared first on The Motley Fool UK.

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Royston Wild has no position in any 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.

A difficult period

Reporting on Wednesday was retirement housebuilder McCarthy & Stone (LSE: MCS). Its half-year results showed that it faced a difficult start to the year, with trading constrained by the lower forward order book brought into the year. This resulted from the market uncertainty following the EU referendum, as well as the anticipated weighting of legal completions from higher margin sites into the second half of the year and the lower number of sales releases during the period.

As such, McCarthy & Stone’s revenue declined by 5% and its operating profit moved 23% lower. However, its future performance is expected to be significantly better. It is forecast to record a rise in earnings of 13% in the current year, followed by further growth of 27% next year. This shows that the long-term trend within the industry is positive, and also that the company’s current strategy is working well.

Despite this, McCarthy & Stone trades on a price-to-earnings growth (PEG) ratio of just 0.3. This indicates it offers a wide margin of safety, as well as capital growth potential. With a dividend yield of 2.7%, it may lack income appeal today. However, with dividends covered 3.2 times by profit and forecast to rise by 27% next year, it could quickly become a must-have income share for the long run.

Growth potential

Also offering dividend growth potential is social care company CareTech (LSE: CTH). It looks set to experience rising demand for its services as spending on healthcare continues to increase. Therefore, while its performance in the short run may be somewhat mixed, in future years it could prove to be a relatively solid growth play.

As with McCarthy & Stone, CareTech has a relatively low valuation. It trades on a price-to-earnings (P/E) ratio of just 10.6, which indicates that a wide margin of safety is on offer. And with growth in its bottom line forecast for next year, a gradual rise in its share price could be warranted.

With a dividend yield of 2.6%, CareTech may not be one of the highest-yielding shares around at the present time. However, with dividends covered 3.6 times by profit, the company should be able to raise shareholder payouts at a rapid rate without hurting its long-term growth potential. Its bottom line growth should also mean dividends can be moved higher, which could make it a strong income stock for the long term.

The post Two bargain dividend stocks that should provide an income for life appeared first on The Motley Fool UK.

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Peter Stephens has no position in any 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.

For example, Dechra (LSE: DPH) has been able to increase its earnings at a double-digit rate in each of the last three years, with it rising at an annualised rate of 23% during the period. This provides an insight into the growth potential of pharmaceutical companies, with the veterinary medicine specialist being able to easily beat the market growth rate. This has led to a rise in the company’s share price of almost 90% since the start of 2012.

Furthermore, GlaxoSmithKline (LSE: GSK) is expected to reverse a challenging four year period by returning to positive net profit growth next year. Its earnings are expected to rise by 12% in 2016, with planned cost savings set to have a major impact on its margins moving forward. As was the case with Dechra in the last three years, its share price is likely to react positively and benefit from improving investor sentiment.

Not to be outdone, social care provider CareTech (LSE: CTH) has been relatively consistent in recent years, with its net profit rising in each of the last three years. And, with today’s update showing that the company is making encouraging progress and is performing in-line with expectations, it is due to continue its long term growth trend into next year.

Despite their upbeat growth outlooks, GlaxoSmithKline and CareTech trade on hugely appealing valuations. In the case of the former, it has a price to earnings (P/E) ratio of only 16.1 and a yield of over 6%. Both of these figures indicate that there is considerable upside potential – especially as GlaxoSmithKline begins to realise the potential of its excellent pipeline in future years. Meanwhile, CareTech trades on a P/E ratio of only 7.6 even though its shares have risen by 11% in the last year. This low valuation, alongside a yield of 3.5% which is well-covered by profit at 3.8 times, indicates that there is huge upside potential over the medium to long term.

Dechra, however, appears to have a rather generous valuation. It has a P/E ratio of 22.6 and, while its financial performance has been exceptionally consistent in recent years, its rating could come under pressure. As such, there could be less share price growth potential from a rerating than is the case for GlaxoSmithKline and CareTech, although investors seeking a more stable operation may wish to favour Dechra.

Of course, a hugely appealing aspect of all three companies is that they are less highly correlated with the wider market than most of their index peers. With the outlook for the global economy continuing to be uncertain, increasing exposure to the likes of GlaxoSmithKline, CareTech and (to a slightly lesser extent) Dechra, could prove to be a sound long term move.

The post Are GlaxoSmithKline plc, Dechra Pharmaceuticals plc & CareTech Holdings plc On The Cusp Of Stunning Returns? appeared first on The Motley Fool UK.

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