Domino’s effect

UK system sales rose 3.9%, a performance the group described as “solid”, with sales in the Republic of Ireland up 2.4% in local currency terms. The group continues to expand, opening 12 stores in Q3, while online sales also grew at a healthy pace, up 7.2% in the UK, and 9.9% in Ireland. Online now accounts for 90.9% of delivery sales.

Management has reviewed its international markets, which include Switzerland, Iceland, Norway and Sweden, and decided to exit them “in an orderly manner.” That’s bad news for delivered pizza lovers in Oslo, but outgoing CEO David Wild concluded that “whilst they represent attractive markets, we are not the best owners of these businesses.”

That seems to make more sense than battling on in the face of “disappointing” international system sales, which were “flat year on year in local currency and down 2.7% on a reported basis in Q3.”

Wild and woolly

Domino’s has also been caught up in a bitter dispute with franchisees over their share of the company’s profits, rumoured to have been worsened by Wild’s hard man tactics and, today, he said a resolution would take time, with no settlement before 2020.

In August, the Fool’s Paul Summers noted that Domino’s no longer holds a net cash position, but instead has net debt of £239m. That doesn’t seem too onerous for a business with a market-cap of £1.29bn. But I’m deterred by its forecast valuation of 17.9 times earnings, for a stock that’s trading 20% lower than three years ago.

Domino’s is an established brand but faces plenty of competition in a crowded home food delivery market, and has serious internal issues to resolve as it wave goodbye to the Wild times. I think you can find better opportunities elsewhere, such as these two Brexit-proof stocks.

Bother for the Brothers 

Fund manager Rathbone Brothers (LSE: RAT) is having a bad time of it with its share price down more than 10%. That comes as investors recoiled at today’s trading update, with its key Investment Management arm suffering net investor outflows in a “difficult market for savings.”

Total funds under management did rise 4.4% year-on-year to £49.4bn at 30 September, over a period when the FTSE 100 fell 1.4%, while gross quarterly organic inflows in Investment Management “remained resilient” at £800m, same as last year.

However, net quarterly outflows in Investment Management totalled £200m, against net inflows of £6.9bn last year (mostly down to acquiring Speirs & Jeffrey). Today’s interim statement blamed “ongoing weak investor sentiment and investment manager departures,” together with anticipated outflows from short-term discretionary mandates.

Worse, this is expected to continue to weigh on net growth in funds under management and administration in 2020 too.

Today’s volatile markets are tough for asset managers, and they will get tougher if the global economy continues to slow. The Rathbone Brothers share price has grown a third over the last three years, but today’s pricey valuation of 18.3 times earnings hardly tempts, while the 2.9% forecast yield isn’t enough compensation.

The post Frankly I’m not tempted by either of these pricey FTSE 250 stocks appeared first on The Motley Fool UK.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Domino's Pizza. 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.

La vida Aviva

FTSE 100 insurer Aviva (LSE: AV) currently offers a stonking forecast yield of 6.7%, generously covered twice by earnings. That is serious income, although experienced investors will tell you that high yields can often signal underlying worries.

Aviva’s share price has fallen 17% in the last three months, partly because, as Rupert Hargreaves explains here, it has been hit by the regulatory threat to one of its major products, equity release lifetime mortgages. Aviva could be forced to hold more capital to safeguard against these risks, and that could imperil its dividend.

Once in a lifetime

That is a concern but Aviva is already well capitalised and the threat has partly been priced in. The group now trades at just 7.5 times forecast earnings, well below the 15 times that is seen as fair value. It has been growing strongly too, with earnings per share (EPS) up 129% in 2017 and forecast to rise another 65% this year, then 8% in 2019. By then, the yield is forecast to hit 7.5%.

There are other threats, as there always will be to a business of this size. Another severe winter could hit profits while rival Prudential has greater exposure to fast-growing Asian markets.

Aviva’s long-term share price performance has been disappointing, it still trades at the same level it did five years ago. However, I still think current share price weakness may be a buying opportunity, given the juicy dividend. If you don’t agree, there’s always that cash ISA.

The Brothers

Or you might want to look another financials company, such as asset manager Rathbone Brothers (LSE: RAT), which published a trading update this morning showing funds under management increased to £47.3bn in Q3 following its acquisition of Speirs & Jeffrey.

This added £6.7bn to its funds and chief executive Philip Howell said the resulting increase in scale “places us in a strong position to continue to improve our service to clients and, mindful of recent volatility in investment markets, to maintain our disciplined investment in the business”.

Asset growth

Stock market volatility always hits fund managers and the Rathbone share price is trading 10% lower than a year ago, although it is still up 50% measured over five. Excluding the acquisition, total funds under management still rose 1.8% in Q3, against a 1.7% drop in the FTSE 100. This was an annualised rate of 2.8%, marking a slowdown from 3.5% in 2017.

Rathbone remains a steady business in these volatile times, posting double-digit EPS growth for each of the last five years. Growth is forecast to slow to 4% this year then rise 11% in 2019. It is fully valued at 15.9 times earnings, and the yield is unexciting at 2.8%, although cover of 2.2 gives scope for progression. The group’s pedigree stretches back to the 1720s and it’s one to consider in the next market meltdown.

The post Forget the cash ISA! The bargain Aviva share price with 6%+ yield looks a much better bet appeared first on The Motley Fool UK.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. 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.

I believe that this trend is set to continue for many years to come as it continues to work on its reputation as a leading wealth manager. Today it reported that profit before tax, for the year to December 31 increased by 17.6% to £58.9m as funds under management expanded to £39.1bn, up 14.3% year-on-year. By the end of 2018, management hopes to have boosted this figure to £40bn. 

Thanks to the performance of its investment managers, the group should have no trouble reaching this goal. Rathbone manages a portfolio of unit trusts for both its clients and outside investors. These trusts have performed well over the past year, so well in fact that assets managed by the trusts grew by 21.8% for the year to a record of £5.3bn. 

Off the back of these impressive figures, management has hiked the final dividend per share to 39p, giving a full-year payout of 61p, an increase of 7% year-on-year. 

Built for the long-term

Rathbone’s peer, Charles Stanley (LSE: CAY) is another asset manager that I believe could help you make a million. 

It too is benefitting from rising demand for asset management services. For the six months to the end of September, it reported profit before tax increased 53.3% while funds under management rose 1.3% to £24.3bn. Even though the company is still relatively small compared to its larger peer, management believes the business can become “the UK’s leading wealth manager by 2020.” This implies that in the years ahead, the group will be working hard to drive growth in assets under management and profitability, which should be great news for shareholders looking for growth.

The company’s well-established reputation should help the proposition to clients as the business is one of the oldest firms on the London Stock Exchange and has been advising clients on wealth management for over 230 years. 

An investment for all environments 

The great thing about these two wealth managers is that they are well positioned to profit in all market environments. For example, today with markets steadily rising, they’re attracting assets from investors wanting to get in on the action. A higher level of assets should translate into more residual income from investment management. On the other hand, in volatile markets, which might scare new investors away, these two firms will benefit from higher levels of trading commission revenue. 

Put simply, no matter what the market environment, Charles Stanley and Rathbone should be able to generate steady returns for investors for many decades to come. Right now shares in Rathbone support a dividend yield of 2.4% and trade at a forward P/E of 19.3. Meanwhile, Charles Stanley trades at a forward P/E of 13.2 and supports a dividend yield of 3.5%.

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Rupert Hargreaves owns no share 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.

However, Legal & General (LSE: LGEN) is one company which still appears to offer a compelling investment case. It could generate high total returns in 2018, but is not the only company with the potential to do so.

Income potential

With a dividend yield of 5.6%, Legal & General is still one of the highest-yielding stocks in the FTSE 100. At a time when inflation is continuing to move higher, this could make it a highly attractive stock to own over the medium term. Since dividend payments are covered 1.7 times by profit, they have scope to move higher at a faster pace than profit growth without hurting the financial health of the business.

The company’s dividends are expected to increase by 6% in the 2018 financial year. This means the stock could be yielding 6% in the current year. Investor sentiment could therefore improve significantly over the coming months.

Valuation

Despite its upbeat income outlook, Legal & General continues to trade on a relatively low valuation. The company’s share price may have risen by 11% during the course of the last year, but it still trades on a price-to-earnings (P/E) ratio of just 11. At a time when the FTSE 100 is trading at a record high, this suggests that the stock offers a wide margin of safety. This indicates that it is relatively unpopular at the present time, but that it could generate high returns in the long run.

Total return potential

Also offering high total return potential in the long run is wealth management specialist Rathbone Brothers (LSE: RAT). The company released a positive trading update on Thursday for the three months to the end of December. It recorded robust growth in funds under management, rising by 14.3% to £39.1bn. Total net inflows across the company for the 2017 financial year were £2.1bn, which is higher than the £1.7bn recorded in 2016.

Looking ahead, Rathbone Brothers is expected to report a rise in its bottom line of 10% in the current year. This could be boosted by the prospects for improved performance from global stock markets, with investor sentiment remaining upbeat at the present time. Despite this, the stock trades on a price-to-earnings growth (PEG) ratio of 1.9, which appears to be low relative to its sector peers.

With a dividend yield of 2.6% and dividend cover of 2.2, the company looks set to become an enticing income play in the long run. As such, now could be the right time to buy it.

The post Legal & General Group plc may not be the only millionaire-maker stock in 2018 appeared first on The Motley Fool UK.

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Peter Stephens owns shares in Legal & General. 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.

Segro grows

Investment trust Segro (LSE: SGRO) is a REIT specialising in logistics properties such as warehouses and distribution centres, with interests in the UK, France, Germany, Italy and Poland. Today it published its trading update for 1 July to 18 October, with CEO David Sleath hailing continued positive momentum, which has driven increased rental income across existing and new properties.

Segro completed new big box distribution warehouses for Yoox Net-A-Porter and Amazon in Italy, and a new urban parcel distribution warehouse for Fedex/TNT in Paris, as e-commerce continued to drive the business. Sleath said: “Investor appetite for prime warehouse assets remains strong, attracted by the structural drivers of occupier demand, limited supply and the prospect of rental growth particularly in the UK and in urban warehousing in Continental Europe.”

Inside the box

These trends in occupier and investor demand should support performance throughout 2017 and 2018, Sleath said. If today’s market response was subdued, that is because the investment community already knows the Segro story. It is booming but expensive, now trading at 28 times earnings.

However, this £5.4bn trust has been expensive for some time, and more than justified that valuation. It also yields a steady 2.97%. Strong lettings and development completions in the third quarter have helped shrink the group’s vacancy rate from 5.5% to 4.1% since 30 June.

To the bone

Management has also been concentrating on paying down debt, reducing annual interest costs by £10m through refinancing. City forecasters predict strong revenue growth, rising from a forecast £300m in 2017 to £351m in 2018, with earnings per share up 10% in 2018. By then, the yield is expected to have increased to 3.2%.

Wealth manager Rathbone Brothers (LSE: RAT) has also been in the money lately, its share price up 44% over the year, and 95% over five years. Financial advisory firms like this one are often seen as a geared play on healthy stock markets, and it has been a success on that score. 

High value

Yesterday it published its trading update for the three months ended 30 September to an upbeat response, although investors are also wary with the stock now trading at just over 20 times earnings. Highlights included a solid 2.5% rise in total funds to £37.5bn, against an increase of 0.8% in the FTSE 100 Index, and a more eye-catching 7% year-on-year rise in underlying net operating income to £70.5m. 

Rathbone now has £5bn under management in unit trusts, up 8.7% since June. Net inflows for the quarter were a record £342m, up from £170m a year ago. Net operating income of £8m for the quarter was up 19.4% on a year earlier.

Market men

Performance has been boosted by a steady rise in the FTSE 100, which ended the quarter at 7,373, up 6.9% from 6,899 one year earlier. Chief executive Philip Howell said investment markets remained relatively benign over the period, but of course, that may not continue.

City analysts are positive, forecasting earnings per share (EPS) growth of 5% this year, then 10% in 2018. The stock also offers a solid if unspectacular yield of 2.2%. Should you pay that valuation? The answer depends on where you think stock markets might go next. Rathbone looks pricey, but a correction could quickly change that.

The post 2 red hot growth stocks I would buy today appeared first on The Motley Fool UK.

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Harvey Jones 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.

Impressive results

Georgia’s largest retail bank TBC Bank Group (LSE: TBCG) today reported results for the second quarter of 2017. Underlying net profit increased by 37% year-on-year, as robust economic conditions spurred strong growth in its loan book.

It’s encouraging to see the continued improvement in its underlying operating performance after shares in the bank have gained over 40% over the past 12 months. These impressive results are proof of the soundness of its growth strategy and showcase the strong operating leverage of the bank.

Return on equity moved higher by half a percentage point to 20.4%, as its loan portfolio grew by 30.8% on the previous year and 3.7% over the previous quarter to GEL7.39bn. Unfortunately, net interest margins (NIM) fell by 1.1 percentage points from the same period last year to 6.8%, reflecting competitive pressures in the banking sector which has driven loan yields lower. That said, conditions may be starting to stabilise, as NIM in the second quarter actually rose by 0.2 percentage points on a sequential quarterly basis, its first increase in just over a year.

Looking ahead, City analysts reckon the bank’s underlying earnings are set to rise 19% in the current year, followed by further growth of 11% next year. This means its shares trade at just 7.4 times its expected earnings this year, or only 6.4 times its expected earnings in 2018. And with forecasts of around 58.5p per share in dividends this year, TBC Bank seems to offer a potent mix of income and value, with the shares forecast to yield 3.7%.

Merger

Also showing exciting momentum are shares in wealth manager Rathbone Brothers (LSE: RAT). They’ve gained 40% since the start of the year but they may yet have further to go.

News broke over the weekend that Rathbone Brothers was in advanced talks with rival Smith & Williamson about a potential all-share merger. If completed, the tie-up would be the latest in a wave of consolidation in the wealth management sector and create a group with £56bn of assets under management.

Combining the two businesses could bring significant cost and revenue synergies for the combined group through increased scale and improved cross-selling opportunities. Rathbone’s revenue growth outlook seems set to slow to the mid-single-digits over the next few years, but the merger could improve its growth prospects as the deal would expand its range of services at a time when clients are seeking ‎increasingly sophisticated services from wealth management firms.

Meanwhile, shares in Rathbones trade on a forward price-to-earnings ratio of 21.6. This may look like a demanding valuation at first glance, but seems justified to me given its sector-beating growth prospects and potential synergy benefits.

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Jack Tang 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.

Rathbone shares have climbed by 52% since 2016’s low in October, to 2,667p (including a results-day 37p rise), and have doubled in price over the past five years.  The reason for that seems apparent from the company’s recent performance — we’ve seen earnings per share growing by 58% in just four years, with analysts forecasting a further 15% gain by the time we reach December 2018.

While the company spoke of “ongoing geopolitical uncertainty” which is currently dominating short-term market conditions, we did see underlying pre-tax profit rise by 22.7%, to £43.3m, in the first six months of the year.

Funds

The key long-term measure of confidence in an investment manger is its level of funds under management, and we saw a 7% rise to £36.6bn since December 2o16 — and seeing as the FTSE 100 put on only 2.4% over the same period, I’m impressed by that.

I would not place my own investment cash under the control of a professional manager, purely because I think my own simple strategy is effective enough without paying anyone else to do it for me. But there are many, from private investors to charities and pension funds, who need the services of companies like Rathbone — and I reckon buying shares in investment managers themselves can be very rewarding.

I see what might be thought of as contrarian safety here too — it’s when markets are at their most volatile that people turn more to respected professionals to manage their cash. 

And I see Rathbone Brothers as a well-managed and well-respected firm that should continue to do well.

Corporate finance

Financial services at all levels can be very profitable, and I’ve also been examining Intermediate Capital Group (LSE: ICP). The company provides capital for a variety of corporate needs, including IPO, management buyouts and similar.

The first quarter of this year has been pretty good, with inflows in the period of €0.6bn coupled with “robust demand for current fundraising“.

The firm did see a 2% drop in funds under management, to €23.3bn, in the three months, but it put that down to an “expected quieter quarter” and an adverse currency exchange impact on dollar-denominated funds among other things. But inflows in the second quarter are expected to be higher.

Outgoing chief executive Christophe Evain said: “Our expectation continues that this will be a strong fundraising year,” and that supports expectations of a good year this year.

One for the brave?

Intermediate Capital is in a volatile sector, and that can show through in erratic share price movements. But one thing I see as a long-term calming effect is the company’s progressive dividend.

It’s grown from 20p per share in 2013 to 27p this year, and though an impressive share price performance over that timescale has dropped the yield to 3.8%, we’re also looking at a trailing P/E of under 10. Dividend cover is strong, and I expect to see yields increasing nicely over time.

If you’re happy to handle short-term volatility without panicking (which I see as an essential characteristic of a growth investor), I really do see Intermediate Capital Group as having solid long-term potential.

The post Rathbone Brothers plc is a growth stock that could have far more to give appeared first on The Motley Fool UK.

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Alan Oscroft 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.

Here are two financial flyers that deserve some brotherly love from investors. There is a good chance they will reward your filial devotion.

Up Close and personal

Merchant banker Close Brothers Group (LSE: CBG) offers its customers lending, deposit taking, wealth management services and securities trading. This FTSE 250 company employs more than 3,000 people, mainly in the UK, and offers its services to both individuals and small businesses, plus a range of related services to retail brokers, asset managers and institutional investors.

It has made plenty of money for investors lately, with its share price up 25% over the past 12 months, and 130% over five years. Last week’s Q3 results saw its banking division report a “solid” loan book, up 4.1% year-to-date at £6.7bn, with management confident of delivering a good result for the full year. Its property and security businesses also performed strongly, although retail finance and commercial finance loans disappointed.

Buoyant stock markets have driven Close Brothers, with strong net inflows into its asset management division, up 7% to £8.5bn, taking total client assets to £10.7bn. This is all very promising and operating margins of 33% also impress, although there are signs the growth story may slow. Earnings per share (EPS) are expected to dip by 1% in the year to 31 July 2017, then climb just 3% subsequently. Today’s valuation of 12.4 times earnings and yield of 3.5% looks undemanding nonetheless.

Oh Brothers!

So to another set of siblings, wealth manager Rathbone Brothers (LSE: RAT). Their specialisms include investment management services for individuals, charities and professional advisers, including financial planning, tax and trusts, multi-manager portfolios and offshore investment management. Investors in the FTSE 250 company, which has a market cap of £1.25bn, have also enjoyed a successful 12 months, the share price up 25% in that time. Over five years it has grown 110%. At these growth rates, Close Brothers and Rathbone Brothers are starting to look like identical twins.

One major difference is the valuation. While Close looks affordable judging by its price-to-earnings ratio of 12.4, Rathbone looks pricier at 20.12 times. Its dividend yield is also lower at 2.32%. However, Rathbone has been flying lately, with total funds under management rising a whopping 22.2% to £35.8bn on 31 March, up from £29.3bn a year ago.

Good to the bone

Rathbone has been boosted both by strong markets and investment performance, with chairman Mark Nicholls hailing its successful progress towards strategic goals, while dutifully warning of continuing political and economic uncertainties.

However once again, City forecasters are anticipating a slowdown, as measured by EPS, which are expected to rise just 3% this calendar year, although that leaps to 11% in 2018. Forecast revenue growth looks steady, up from £251m in 2015 to £275m this year and £295m in 2018.

Bros

Close Brothers and Rathbone Brothers display another sibling similarity. Operating in the same industry, both are subject to exactly the same macro tailwinds. They look like tempting growth plays today, with global stock markets bubbling around all-time highs. If markets dip, the brothers could be in a spot of bother. However, that might be an even better time to buy them.

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Harvey Jones 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 the period, Aldermore reported a 6% increase in new customer loans to £7.9bn, up from £7.5bn at year-end 2016. At the same time, customer deposits also grew by 5%, taking the value of customer deposits held at the bank to £7bn, up from £6.7bn at the end of the last quarter. The group’s net interest margin (NIM), a key measure of banking profitability as it measures the gap between how much interest it is generating on its lending compared to the interest paid out to depositors, remained stable at 3.5%. Even though the NIM did not change during the period, Aldermore’s is still an industry leading-figure as most high street banks are reporting margins below 3%.

As well as the bank’s impressive NIM, its tier one capital ratio stood at a respectable 11.5% at the end of the reporting period. Tangible book value per share rose 5% quarter-on-quarter to 160.3p.

Undervalued growth

Today’s results from the business show that it is on track to hit City forecasts for growth for the year. Analysts are currently expecting the group’s earnings per share to grow by 17% this year followed by a growth of 8% next year. If management can hit these targets, Aldermore will have improved pre-tax profit threefold in just five years. 

However, despite this impressive growth, its shares are trading at a depressed multiple of only 8.8 times forward earnings.  It seems the market is concerned about the bank’s exposure to the UK economy following Brexit. But based on today’s figures, this concern seems unwarranted. Overall, if you’re looking for high-growth at a low price, Aldermore could be a great fit for your portfolio.

Growing wealth 

Wealth manager Rathbone Brothers (LSE: RAT) also announced its first quarter results this morning. Just like Aldermore, it reported strong growth across the business during the first three months with funds under management up by 4.7% to £35.8m. Fee income generated from operations rose 22% year-on-year, reflecting positive markets and growth in business. Commission income also showed a substantial uplift of 12.2% and net operating income for the overall investment management business rose 18.3%.

Rathbone’s growth over the past five years has been nothing short of explosive with pre-tax profits surging 100% from £38.5m to £76.2m as predicted for this year. Over the same period, earnings per share increased by 62%. Analysts are expecting earnings growth of 3% this year followed by 11% for the year after. 

Unfortunately, shares in Rathbone’s are not as cheap as those of Aldermore as they currently trade at a forward P/E of 18.6. Nonetheless, with double-digit earnings rises projected for the years ahead, it looks as if it’s worth paying a premium for the shares.  

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Rupert Hargreaves 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.

However, companies such as Barclays (LSE: BARC) could have a significantly better 2016 due to an improving economic outlook and highly appealing valuations. For example, the UK and global economies continue to show signs of long-term growth potential, with the recent US interest rate hike providing evidence that the world’s largest economy is returning to full health. And, while doubts surrounding the Chinese growth story are likely to provide continued shocks to the FTSE 100 and its constituents in 2016, the valuation of the financial services sector indicates upward rerating potential.

For example, Barclays trades on a price-to-earnings (P/E) ratio of just 8.2, which highlights the huge scope for an upward rerating. And with Barclays forecast to increase its bottom line by 21% in the current year, its financial performance is not only expected to be healthy but could also act as a positive catalyst on investor sentiment and push its shares upwards. Clearly, a period of uncertainty is likely as a result of Barclays’ new management team and the almost inevitable strategy shift. But with an improving asset base and rising profitability, Barclays seems to be a strong buy at the present time.

Long-term prospect

Similarly, Investec (LSE: INVP) also offers excellent value for money with the South Africa-focused bank trading on a P/E ratio of just 10.6. As with Barclays, Investec is expected to post strong earnings growth in the current financial year with its bottom line forecast to rise by 13%. This is likely to enable a significant rise in the company’s dividend, with shareholder payouts due to increase by as much as 12% next year. This puts Investec on a forward yield of 5.6%.

Of course, the South African economy is undergoing a challenging period at the present time. This was a major reason for the high level of volatility in Investec’s share price that has been witnessed in recent months. While this could continue in the short-to-medium term, for long-term investors now appears to be an excellent time to buy a slice of the bank due to its compelling mix of growth, income and value prospects.

Meanwhile, financial services peer Rathbone Brothers (LSE: RAT) also has impressive earnings growth potential. Its bottom line is expected to have risen by 14% in 2015 and is then due to increase by a further 9% in 2016. While both of these figures are highly impressive, Rathbone’s valuation appears to price them in since the company trades on a P/E ratio of 17.3. This equates to a price-to-earnings growth (PEG) ratio of around 1.9, which indicates that while the company’s financial performance may be on the up, Barclays and Investec appear to be more appealing investments.

The post Are Barclays PLC, Investec plc And Rathbone Brothers plc ‘Screaming Buys’? appeared first on The Motley Fool UK.

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