It’s been a volatile start to 2022 for global stock markets as geopolitical uncertainty and monetary tightening begin to bite. However, I’ve identified two FTSE 100 stocks that have bucked this trend.

With strong fundamentals and solid earnings forecasts, I believe these UK shares have the potential for substantial gains over the next five years and beyond. Here’s why.

FTSE 100 share #1 – Shell

Shell (LSE: SHEL) stock has enjoyed explosive gains of over 26% this year after superb financial results for 2021. Adjusted earnings beat expectations, rocketing to $19.29bn from $4.85bn the previous year.

Buoyed by sky-high oil prices, the FTSE 100 energy giant will undertake an $8.5bn share buyback programme by the end of Q2. Shell also intends to hike its dividend by 4% to $0.25 per share.

Yet despite its strong recent performance, the Shell share price is marginally down over five years. In addition, the plummeting values of its Russian assets have recently cost the company nearly $5bn since it ceased operations in the country.

Nonetheless, I remain bullish. Shell has sufficient geographic diversification to withstand Russian sanctions in my view. For instance, there’s its substantial on-stream oil and gas projects near Nigeria and Mexico.

Shell stock could also benefit from an agreement with Deutsche Telekom to supply renewable energy for 10,000 electric vehicle charging points in Germany. I regard this as a positive development for the fossil fuel business.

While there are signs of a greener future for the company, I still see oil as the real driver of growth for Shell’s share price. During a booming commodities cycle, the next five years should be significantly better for this FTSE 100 stock in my opinion. I’d buy.

FTSE 100 share #2 – London Stock Exchange Group

Financial infrastructure and data analytics form the core of London Stock Exchange Group (LSE: LSEG)’s business. The LSE share price is up 16% over three months and an impressive 73% over three years. This FTSE 100 company generates 44% of its earnings in EMEA, 42% in the Americas and 14% in Asia.

LSE services 40,000 customers in 190 countries. Last year, the company enjoyed revenue growth in all three of its primary divisions — data & analytics, capital markets and post trade. Adjusted earnings per share almost doubled to 287p.

It also delivered statutory total income of £6.4bn for 2021 and a 27% increase in the total dividend per share to 95p. This year, the company has ambitious plans to expand its Workspace technology to foreign exchange users at scale, reinforcing its end-to-end FX offering. Overall, the FTSE 100 stock looks well positioned for long-term growth.

However, cautious investors will note recent news concerning heavy selling of LSE shares. Institutional investors sold a total of £450m last month, according to Bloomberg, suggesting the stock could be overvalued. As Brexit tensions persist, further headwinds are posed by EU plans to move its clearing operations away from the London Stock Exchange to the eurozone by 2024.

Nevertheless, I’m optimistic about this British financial company. While not without risks, it’s a highly cash-generative business with truly global diversification. For me, LSE stock is a good investment to buy and hold for years to come.

The post 2 soaring FTSE 100 shares I’d buy and hold until 2027 appeared first on The Motley Fool UK.

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Charlie Carman 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.

Burberry

Luxury brand Burberry still takes up a little over 7% of  Train’s fund despite having endured a pretty awful 2020. National lockdowns and travel bans forced it to temporarily close much of its store estate earlier in the year.

As infection levels rise again, trading will likely remain tough. Nevertheless, Train remains confident that quality will out. The growth of wealth in countries such as China (where premium Western brands remain coveted) shows no signs of slowing down. Moreover, Burberry has a very strong cash position which should allow it to recover strongly in time.

Like Train, I continue to think the £6bn-cap is worth snapping up on current weakness.

RELX

Approaching 10%, RELX is Train’s fourth-biggest holding. The company specialises in data analystics and also operates a leading global events business. Unsurprisingly, it’s the latter that’s causing investors concern.

As you might expect from someone who rarely sells (or buys!), Train doesn’t seem overly phased. This could be because the exhibitions business only accounts for a small proportion of RELX’s annual revenue and profits.

Shares have struggled to recover their mojo since March’s market crash. At 18 times forecast FY21 earnings, however, this could be a great time to load up on this quality FTSE 100 company.

Diageo

Premium spirits giant Diageo takes up another near-10% of Train’s portfolio. The fact that he’s willing to retain such a big holding despite the ongoing threat of the coronavirus coupled with a big recession is a testament to how highly he rates the company.

We’ve seen a brief recovery in the share price recently but it would be foolhardy to suggest we’re through the worst. Expect another bout of volatility as more pubs and bars are required to close across the UK. 

At least investors can enjoy the dividends in the meantime.

Unilever

Another consumer goods favourite of Train’s is also one of the biggest UK-listed stocks: Unilever. In sharp contrast to companies already mentioned, the Marmite-maker’s share price has already recovered from March’s market sell-off. And then some.

Paying through the nose for any stock isn’t recommended. Then again, it’s hard to imagine this FTSE 100 giant suffering the same fate as other more discretionary stocks if the pandemic continues into 2021. 

It won’t double in value soon, but Unilever remains a great defensive FTSE 100 pick, in my view. 

London Stock Exchange

At 10% of his portfolio, London Stock Exchange is Train’s biggest holding. One reason for this is its superb performance over the last few years. Had one bought the stock five years ago, one would now be sitting on a gain of roughly 240%. Just owning LSE since mid-March would have grown one’s cash by almost 50%. 

Shares in the £31bn-cap trade on a frothy 41 times FY20 earnings. Nevertheless, Train appears reluctant to sell. This could be because he believes there’s more volatility ahead for markets — something that should do no harm to LSE’s revenue. 

LSE is due to release an update on trading over Q3 on October 23. 

The post Wow! Nick Train has almost 50% of his portfolio in these FTSE 100 stocks appeared first on The Motley Fool UK.

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Paul Summers owns shares of Burberry. The Motley Fool UK has recommended Burberry, Diageo, RELX, and Unilever. 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.

With this in mind, here are the top three gainers from the FTSE 100 that you wished you’d bought 12 months ago. 

On the podium

London Stock Exchange (LSE: LSE) has been the third biggest gainer since this time last year, rising 67%. Contrast this with the index that has climbed ‘only’ 7.4% in value. 

Much of this outperformance can be attributed to the company becoming a takeover target. Back in October, however, Hong Kong’s stock exchange withdrew its £32bn bid after the LSE stated that this fell “substantially short” of what it considered to be an appropriate valuation.  Since then, the latter has gone on to report a 12% rise in sales (to £587m) over Q3 and completed the £22bn acquisition of data firm Refinitiv that its suitor was opposed to. 

As a result of the positive momentum witnessed over the last year, LSE’s shares are now changing hands for 35 times earnings, reducing to 30 based on analyst projections for FY20. That seems rather a lot to me, so I wouldn’t be a buyer at the current time. 

Another winner has been engineering, design and information management software provider Aveva (LSE: AVV). Had you bought the stock this time last year and done nothing at all, you’d now be sitting on a gain of 85%. 

One reason for this has been a rise in the proportion of overall revenue that is now reoccurring (from existing clients). Recent results from the company showed this had soared 42.1% over the six months to the end of September.

Like LSE, the only problem is that Aveva’s shares now look prohibitively expensive on 42 times earnings. Should the company achieve the 12% growth expected by analysts in the next financial year, this valuation reduces to 37 times earnings based on the current share price. That’s still high for any stock but particularly so for one whose margins and returns on capital have both significantly fallen in recent years.

By far the best early Christmas present you could have bought yourself last year, however, was retailer JD Sports (LSE: JD). Twelve months later, its share price has more than doubled. Aside from being a superb result for holders considering the carnage in the sector, this is also evidence that you don’t necessarily need to buy into risky small-cap stocks to make good money in the market.

September’s half-year results showed just how well the company is negotiating the pressure on the sector with revenue jumping by 47% to £2.72bn and pre-tax profit 6.6% higher at just under £130m. On top of this, JD commented that its international development continues at pace with a raft of stores opening in Europe, Asia and the US. 

Again, the one question prospective buyers must ask is whether — at 24 times earnings for the current year — all the good news (and some expectation of bumper sales over Christmas) is already priced in to this classy business.

The post If only I’d bought these winning FTSE 100 stocks for my ISA last year appeared first on The Motley Fool UK.

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Paul Summers 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.

Before I look at why they’ve done so well, and whether I think they can continue to deliver for investors, the table below summarises some relevant data.

As you can see, the Footsie’s flying three operate in different sectors. So we’re looking at company-specific reasons for their high performances, rather than some industry driver floating all boats in one sector.

Increasing enthusiasm

A transformative merger of Aveva and Schneider Electric‘s industrial software business, which completed in March last year, created a global leader in engineering and industrial software. Investors have become increasingly enthusiastic about the prospects for the enlarged group.

Results in May showed a 12% uplift in annual revenue and a 27% increase in adjusted earnings per share (EPS). However, looking ahead, City analysts expect earnings growth to moderate to low teens. Aveva’s forecast P/E of 37.4 is far higher than its ever been in my memory, and I’m unconvinced the growth on offer warrants quite such a high multiple.

It strikes me that even a minor miss on earnings forecasts could see the shares hammered, and that Aveva may have to exceed forecasts to maintain investors’ enthusiasm. As such, I’m minded to avoid the stock at the current level.

Bold move

The LSE share price was already performing strongly this year, before jumping 15% last Monday. This came on the back of news it’s agreed to acquire global provider of financial data and infrastructure Refinitiv in an all-share transaction for a total enterprise value of $27bn.

The deal is a bold move by LSE, and a “compelling” one, according to management. It cites a host of impressive benefits, including “expected adjusted EPS accretion of over 30% in the first full year following completion, increasing in years two and three.” Shareholders are clearly up for it, although with various regulatory approvals also required, completion is not expected until the second half of 2020.

The current-year forecast P/E of 36.3 doesn’t reflect the potential future earnings power of the enlarged business. Still, I’m not sure I’d be buying the stock today, but if I owned it, I’d continue to hold.

Outstanding performer

JD Sports is the top performer, not only in the year to date, but also over the last five years, the latter providing shareholders with a terrific gain of more than 700%. A truly outstanding effort.

A leading retailer of sports, fashion and outdoor brands, its UK growth and strong efficiency metrics put many other retailers to shame. Furthermore, it’s expanding fast internationally, including in the most significant global market of all, following last year’s £396m acquisition of US athleisure chain Finish Line.

JD’s forecast P/E of 18.8 is far lower than Aveva’s and LSE’s, but higher than many retail peers. Deservedly so, in my opinion. Annual low teens EPS growth looks sustainable to me, and with management recently confirming encouraging progress in the US, I rate the stock a ‘buy’.

The post The 3 best performing FTSE 100 stocks of 2019 (so far) appeared first on The Motley Fool UK.

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G A Chester 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.

Retailers appear to be queuing up to use Ocado’s automated warehouse technology. And it does sound impressive. The company has lodged 322 patent applications over the last three years, covering areas such as robotics, artificial intelligence, real-time control systems and machine learning.

Robotic picking is being tested in the firm’s Andover warehouse and the company hopes to bring this into operational use in the next few months.

Sales +12.3%

Ocado would like to be seen as a technology stock whose UK grocery retail business acts as a shop window for potential customers. Arguably, I think it’s succeeding.

Last year’s string of contract wins seemed impressive to me. The company is now operating in the USA, Canada, Sweden, France and Spain, as well as the UK.

The UK retail business is also continuing to grow, with sales up by 12% to £1,475.8m last year.

The only problem is that this business doesn’t make any money. Today’s figures show a group operating loss of £31.9m for 2018.

In my opinion, the real problem is that Ocado can’t scale up like a true tech firm. An online-only business can deliver rapid, profitable growth with very little investment. All it needs is more users.

For Ocado, the opposite is true. Every new deal or expansion requires the firm to build more of its clever warehouses. Management expects to spend £350m next year as it starts building warehouses for the customers who signed deals in 2018. Only after this will these contracts start to generate any revenue.

In the meantime, the UK retail business is clever but remains very small, with annual sales of about £1.4bn, compared with £17.3bn for the UK’s fourth-largest supermarket, Morrisons.

Ocado may end up being a good business, but it’s expected to lose money again next year. Despite this, the shares are valued at 4.4 times 2018 sales. In my view, the shares remain far too expensive. For me, this is one to avoid.

A real quality growth stock

If you’re interested in high-quality FTSE 100 stocks with outstanding growth, then one company I’d consider is London Stock Exchange Group (LSE: LSE).

This group owns the essential ‘plumbing’ that lies behind the London Stock Exchange and a number of other markets. At the heart of the company’s commercial success is its ability to provide data and transaction services that financial institutions depend on.

LSE shares have risen by 200% since the end of 2013. The group’s profits have kept pace with this growth, rising from £216m in 2013 to £598m for  the year to 30 June 2018.

Buy and hold forever?

LSE shares have rarely been cheap but in contrast to Ocado, LSE’s demanding price tag has usually been backed up by strong results. The dividend has doubled since 2011 and was not cut during the financial crisis. Adjusted earnings growth is forecast at 14% for 2018 and 16% in 2019.

Trading on 27 times 2018 earnings with a 1.3% yield, this stock is a long-term investment. But I think it could be a good stock to buy and hold forever, topping up during market dips.

The post I’d dump the Ocado share price and buy this fast-growing FTSE 100 dividend stock appeared first on The Motley Fool UK.

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Roland Head 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.

Indeed, The Lindsell Train UK Equity portfolio, which he co-manages, returned an impressive 124% over the five years to the end of July, more than doubling the FTSE 100 total return of 58%.

Today, I’m looking at two key Train holdings and explaining why Train sees appeal in these stocks.

London Stock Exchange Group 

Train has significant exposure to the financials sector, and looks to invest in companies that will benefit from rising share prices over time. As a result, the portfolio manager has a sizeable holding in London Stock Exchange Group (LSE: LSE), as he anticipates that global stock markets will continue to rise over the long term.

A glance at London Stock Exchange’s financials reveals that the company is in good health financially. Revenue has more than doubled over the last five years, from £815m to £1,657m, and City analysts expect a further 11% rise for FY2017. The company consistently generates strong operating margins, and profitability also appears to be trending in the right direction, with analysts forecasting the group to generate earnings per share of 149p this year, up from 125p last year.

As a result, the stock doesn’t trade cheaply, and at the current share price trades on a forward looking P/E ratio of 26.6. The dividend yield is 1.1%. While I share Nick Train’s bullish long-term stance on London Stock Exchange, I’d prefer to buy the stock at a slightly lower valuation. The shares have had an incredible run over the last five years, rising almost 350%, so for now I’ll keep the company on my watch list and monitor for a pullback.

Schroders

Another financial stock that Train has considerable exposure to is FTSE 100-listed investment manager Schroders (LSE: SDR). The portfolio manager believes that with more people needing to save for their retirements, the long-term prospects for many investment managers look attractive.

Train stated recently that while he believes that competitive and regulatory pressures will result in investment manager fees falling in the future, the fact that equity markets have a tendency to rise over time will offset this. He also believes that technological change will lead to cost savings across the industry. 

Schroders shares don’t look expensive at present – on analysts’ FY2017 earnings estimates of 205p, they trade on a forward looking P/E of 16.4. This looks reasonable to me, given the fact that the company has increased its revenues by a compound annual growth rate (CAGR) of 7.4% over the last five years, and grown its dividend at an impressive CAGR of 14.5% since 1988.

However, fund management stocks often pull back during market corrections, and with that in mind, a good time to buy Schroders shares might be when markets wobble a bit, and sentiment is a little less bullish.

The post Why Britain’s Warren Buffett owns these two FTSE 100 stocks appeared first on The Motley Fool UK.

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Edward Sheldon 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.

Changing outlook

The last year has been hugely eventful for London Stock Exchange Group (LSE: LSE). Its proposed merger with Deutsche Börse fell through and this meant that its outlook was arguably less certain. However, a recent trading update showed that the fundamentals of the business remain strong. LSE has made a good start to the 2017 financial year, with total income from continuing operations up 19% and gross profit moving 17% higher in the first quarter.

Looking ahead, investment in a range of operations and new initiatives is expected to yield improving financial performance. A £200m share buyback programme could improve investor sentiment in the stock, while a focus on potential investments could provide a boost to its growth profile alongside its impressive organic growth.

With LSE forecast to record a rise in earnings of 12% this year and a further 13% next year, it remains a strong growth proposition within the large-cap arena. Since it trades on a price-to-earnings growth (PEG) ratio of just 1.6, now could be the perfect time to buy it. The company’s share price appears to have room to grow – especially if it engages in M&A activity over the medium term.

Growth opportunity

The recent first quarter results release from leisure travel company Carnival (LSE: CCL) showed that it is making encouraging progress. It witnessed increased demand and rising pricing power. This enabled it to overcome the challenges posed by fuel and currency changes to enjoy a particularly strong peak booking period. This should be enhanced by improved marketing efforts, as well as a more innovative approach to customer service, which together are set to grow its earnings over the medium term.

Trading on a price-to-earnings (P/E) ratio of 23.3, Carnival may appear to be overvalued at the present time. However, it appears to be on the cusp of improving financial performance. The plans for reduced taxes in the US could lead to greater spending among consumers – particularly on leisure items if the state of the economy continues to improve. Similarly, with austerity now nearing the end of its life in many developed countries, the outlook for consumer spending is also generally positive.

While Carnival may not be the cheapest share around, the reality is that its valuation could move higher. For investors seeking a high-quality business trading at a fair price, it appears to be a logical option.

The post 2 Footsie growth shares I’d buy before it’s too late 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.

Serco

Shares in support services company Serco (LSE: SRP) have risen by 15% today after it recorded better than expected performance in the first half. Its operating profit increased from £37m in H1 2015 to £65m in the same period of 2016 as factors such as the favourable resolution of commercial issues and certain contracts running longer than expected had a positive impact on its performance.

Although many of these factors aren’t expected to recur, Serco continues to make good progress with its turnaround strategy. It has removed £550m from its operating costs and has invested heavily in its infrastructure, processes and purchasing systems. Together, they’re having a significant impact on its financial performance and Serco has today upgraded its full-year guidance, which is a key reason for its share price gain.

However, Serco is still expected to report a fall in its bottom line of 45% this year, followed by a further decline of 22% next year. With its shares trading on a forward price-to-earnings (P/E) ratio of 57, it seems to be overvalued and worth avoiding at the present time.

London Stock Exchange Group

London Stock Exchange Group (LSE: LSE) also reported today, recording growth across all of its core business areas in the first half. It delivered particularly impressive growth in its information services segment, which contributed to a 9% rise in sales and an increase in adjusted operating profit of 9%.

Encouragingly, LSE’s operating expenses remained well controlled at a time when the company is investing in growth opportunities. Furthermore, its balance sheet remains strong and it has been able to reduce leverage to 1.3 times net debt-to-EBITDA (earnings before interest, tax, depreciation and amortisation).

Looking ahead, LSE’s merger with Deutsche Börse is set to go ahead as planned. With LSE forecast to record a rise in its earnings of 14% in each of the next two years, its outlook remains positive. And with its shares trading on a price-to-earnings growth (PEG) ratio of 1.4, it offers good value for money.

UDG Healthcare

Meanwhile, UDG Healthcare (LSE: UDG) also released an update today. Its third quarter saw sales and profits rise versus the same period of the previous year, with UDG reiterating its full year guidance of a 6% to 8% rise in diluted earnings per share (EPS) on a constant currency basis.

On the topic of currency, UDG has decided to change its reporting currency from euros to US dollars. This is because of the changing geographic profile of the business, with the vast majority of its profits now being generated in dollars. Furthermore, UDG’s US-based businesses are demonstrating the greatest growth opportunities and future corporate development activity is likely to be US-focused. As such, reporting in dollars seems to make sense.

With UDG trading on a P/E ratio of 25.2, its shares appear to be rather overvalued. Although it’s set to increase its earnings by 10% next year, it’s still difficult to justify purchase at its current price level.

The post Do today’s updates make these 3 stocks ‘must-haves’ for your portfolio? 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. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

One year top performers

Over the last 12 months, the best performing stocks have been Fresnillo (+95%), Randgold Resources Limited (+66%), Paddy Power Betfair (+60%), Admiral Group (+46%) and Mediclinic International (+43%).

This is certainly a diverse selection of stocks and there’s every chance that investors who own a portfolio of ‘mainstream’ popular stocks might not own any of these stocks.

Fresnillo and Randgold Resources produce silver and gold, respectively, and their share prices have clearly been boosted by the market uncertainty over the last year. Indeed, on the back of the EU referendum result on Friday, Randgold spiked 28% higher, while Fresnillo jumped 12%.

Paddy Power Betfair has steamed ahead after the merger, while Admiral Group has enjoyed strong momentum after lifting its dividend by 16% for FY2015.

Mediclinic International has likely gone under the radar for many investors since joining the FTSE 100 in March. But with revenues forecast to power ahead over the next two years, it’s no surprise this stock is on the top performer’s list.

Three year stars

On a three year view, the best performing stocks on an annualised basis have been Hikma Pharmaceuticals (+37%pa) , DCC (+37%pa), Mediclinic International (+35%pa), London Stock Exchange Group (+30%pa) and Shire (+28%pa).

Once again, several of these stocks are not mainstream ones. Furthermore, many have been promoted into the FTSE 100 quite recently, which illustrates the importance of looking outside the FTSE 100 when looking for growth opportunities.

Headquartered in Jordan, Hikma joined the FTSE 100 for the first time last year, before being demoted from the index in March and then re-entering the index earlier this month. The company has an excellent record of generating strong shareholder returns and could certainly provide an alternative to the larger slow-burning healthcare stocks such as GlaxoSmithKline.

International sales, marketing, distribution and business support services group DCC has seen strong earnings growth in the last few years and the company’s promotion to the FTSE 100 in December last year has clearly generated extra interest in the stock.

London Stock Exchange Group jumped after acquisition interest from Deutsche Bourse earlier this year, although this merger may clearly face challenges after the recent Brexit vote.

Shire makes the ‘three year best performing’ list despite the company’s share price falling from over 5,700p in August last year to 4,100p today.

Five years champions

Lastly, over a five year period, the top performing stocks on an annualised basis are Ashtead Group (+47%pa), Barratt Developments (+34%pa), easyJet (+34%pa), Taylor Wimpey (+34%) and Persimmon (+33%pa).

There’s a clear theme here, with property development stocks taking three of the top five positions, even after all three companies were hit heavily on Friday after the EU referendum result.

International equipment rental group Ashtead claims the top spot after enjoying fantastic growth in earnings over the last five years, although it was starting from a low base after the Global Financial Crisis.

EasyJet joins makes the top five after seeing earnings rise dramatically in the last five years.  

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Edward Sheldon owns shares in GlaxoSmithKline. The Motley Fool UK owns shares of and 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.

Today’s update from recycled packaging company DS Smith (LSE: SMDS) shows that it is making solid progress. Its performance is in-line with previous expectations and the trends described in its 9 March trading statement have continued. Encouragingly, DS Smith has enjoyed good volume growth across its business, with return on sales and return on capital improving versus the same period of the prior year.

Looking ahead, DS Smith continues to invest heavily in expanding its geographic footprint and customer offer. In fact, it has invested €600m in acquisitions in the last year and with growth in sales from its large pan-European customers having been particularly strong, it seems to be on the road towards becoming a more diversified business.

With DS Smith trading on a price to earnings (P/E) ratio of 12.9, it seems to offer good value for money. That is further evidenced by the forecasts for the company’s bottom line, with DS Smith’s earnings expected to rise by 13% this year and by a further 7% next year. As such, its price to earnings growth (PEG) ratio stands at just 1.3, which indicates that it could prove to be a profitable long term buy.

Delivering growth

Also updating the market today on its progress has been London Stock Exchange Group (LSE: LSE).  It recorded a strong performance in its first quarter, with all main business divisions delivering growth on an organic and constant currency basis. There was particularly strong performance in LCH revenues, with them rising by 12% at constant currency versus the comparable period from last year.

With LSE’s planned merger with Deutsche Borse set to create a larger and more enticing growth opportunity, this is an exciting time for investors in LSE. And with the company forecast to grow its bottom line by 19% this year and by a further 14% next year, it seems to be performing exceptionally well as a business. Furthermore, with it having a PEG ratio of only 1.4, its margin of safety appears to be sufficiently wide to merit investment at the present time.

Overly ambitious

Meanwhile, shares in Cambian (LSE: CMBN) were among the major fallers today after it released a rather disappointing set of full-year results. The specialist behavioural health services provider recorded a wider loss compared to the prior year, with its pretax loss amounting to £16.4m versus £4.2m in 2014. Part of the reason for this was an overly ambitious expansion plan, but with Cambian taking remedial actions, its future could be much brighter.

Furthermore, Cambian continues to experience strong demand for its services and it is confident that growth will be restored for the full-year. In fact, it is forecast to return to profitability this year and with Cambian’s shares trading on a PEG ratio of 0.4 they seem to offer a relatively appealing risk/reward ratio. Therefore, for less risk averse investors, Cambian could be worth a closer look.

The post Are DS Smith plc, Cambian Group plc and London Stock Exchange Group plc 3 stocks to avoid following today’s updates? 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 recommended DS Smith. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.