Diageo
Although Diageo’s (LSE: DGE) (NYSE: DEO.US) recent update showed that sales of premium spirits are stalling somewhat across the globe, the company continues to have excellent long term growth potential. And, even though the current year is set to be a disappointment, Diageo is forecast to bounce back strongly with growth of 8% in its bottom line next year. That’s slightly higher than the wider market growth rate and shows that, while no company is immune to challenging periods, Diageo has a robust business model that continues to offer a strong long term growth profile.
Furthermore, Diageo remains a very defensive stock. This is evidenced by its relatively low beta of 0.9, which could mean that its shares offer a less volatile experience for their holders. And, while a price to earnings (P/E) ratio of 20.8 is hardly cheap, Diageo still seems to offer good value when compared to its global consumer peers.
RBS
It has taken a long time for RBS (LSE: RBS) (NYSE: RBS.US) to return to profitability, with the bank’s bottom line finally moving in to the black last year. And, looking ahead, RBS could post strong growth numbers, since it stands to significantly benefit from a loose monetary policy environment that is showing little sign of abating. This is likely to mean fewer bad loans, more new loans and further improvements in the outlook for the UK economy.
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Interestingly, RBS still trades at a major discount to the wider index. While the FTSE 100 has a P/E ratio of around 16, RBS has a P/E ratio of 12.2 and this indicates that its shares could move much higher – especially if RBS does begin to deliver strong bottom line growth which, given the low interest rate environment, seems likely.
Carpetright
Today’s update from Carpetright (LSE: CPR) was upbeat, with full year profit set to be above market expectations. As such, shares in the floor coverings company have surged by 7% at the time of writing. This takes Carpetright’s share price gains to a whopping 46% in the last six months but, with stunning growth being forecast, more capital gains could be around the corner.
In fact, Carpetright is expected to increase its bottom line by 35% next year, followed by 24% the year after. That’s a superb rate of growth and shows that the UK economy is moving from strength to strength, which is clearly good news for cyclical stocks such as Carpetright. And, with shares in the company trading on a price to earnings growth (PEG) ratio of just 0.7, they seem to offer growth at a very reasonable price.
