Searching For Hot Growth Giants? Check Out GlaxoSmithKline plc, Diageo plc & Bunzl plc

Royston Wild explains why growth hunters need to check out GlaxoSmithKline plc (LON: GSK), Diageo plc (LON: DGE) and Bunzl plc (LON: BNZL).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am running the rule over three hot growth picks.

Diversified darling

I believe support services provider Bunzl (LSE: BNZL) is one of the best stocks out there for those seeking solid earnings growth year after year.

The firm’s broad reach across a variety of essential areas — from manufacturing plastic cutlery and mops through to gloves and hard hats — provides its sales profile with that little added protection regardless of broader economic conditions.

And Bunzl’s acquisition strategy provides its earnings picture with additional fuel — the company snapped up an 80% stake in Turkish packager Bursa Pazari for £32m just this month.

The City expects Bunzl to enjoy earnings bumps of 5% and 3% in 2015 and 2016 respectively, resulting in P/E ratings of 20.6 times and 19.9 times. I reckon this is decent value for a firm with such strong defensive characteristics.

Medicines mammoth

In previous years, investors seeking stocks with sterling growth prospects would have been wise to steer well clear of pharmaceuticals giant GlaxoSmithKline (LSE: GSK).

A relentless stream of exclusivity losses on key labels has led to a flurry of ‘generics’ producers staging an attack on the company’s top line. As a result GlaxoSmithKline has seen earnings dip during each of the past four years.

However, the huge sums GlaxoSmithKline has chucked at its in-house R&D team, not to mention the cash splurged on acquisitions in hot growth areas, suggest that the tide is finally turning. The company expects to submit 40 major labels by 2025, 80% of which the company believes “have the potential to be first in class.”

Consequently the City expects GlaxoSmithKline to return to growth from this year onwards, an expected 13% earnings advance leaving the firm dealing on a reasonable P/E ratio of 16.2 times. And the multiple drops to a mere 15.5 times for next year thanks to predictions of a 6% bottom-line advance.

I believe this is a great level to get in on GlaxoSmithKline, and expect the firm’s ever-improving product pipeline — not to mention surging healthcare spend in emerging markets — to blast earnings higher in the years ahead.

Drink it in

Like GlaxoSmithKline, drinks leviathan Diageo (LSE: DGE) has also been forced on the backfoot in recent times.

A combination of cooling sales in key markets like Asia and severe currency headwinds has seen earnings slide by 7% in each of the past two years, and a further 1% dip is pencilled in by City brokers for the year to June 2016.

But I believe Diageo has the muscle to overcome these problems. Few drinks companies can compete with the splendid product portfolio of the London business, whose labels include the likes of Guinness, Captain Morgan and Smirnoff.

And Diageo is boosting investment in these popular labels to get sales rocketing in the years ahead. Indeed, the company announced earlier this month that it is rolling out its Johnnie Walker Green Label whisky across the globe.

With the company also boosting its presence in lucrative developing regions, Diageo is expected to get earnings moving again from next year — a 9% rise is currently forecast, resulting in a P/E rating of 19.6 times. I believe this is decent value for a stock of Diageo’s obvious quality.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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

More on Investing Articles

Investing Articles

How I’d use an empty Stocks and Shares ISA to aim for a £1,000 monthly passive income

Here's how using a Stocks and Shares ISA really could help those of us who plan to invest for an…

Read more »

Investing Articles

This FTSE stock is up 20% and set for its best day ever! Time to buy?

This Fool takes a look at the half-year results from Burberry (LON:BRBY) to see if the struggling FTSE stock might…

Read more »

Investing Articles

This latest FTSE 100 dip could be an unmissable opportunity to pick up cut-price stocks

The FTSE 100 has pulled back with the government’s policy choices creating some negative sentiment. But this gives us a…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

As the WH Smith share price falls 4% on annual results, is it still worth considering?

WH Smith took a hit after this morning’s results left shareholders unimpressed. With the share price down 4%, Mark Hartley…

Read more »

Investing Articles

The Aviva share price just jumped 4.5% but still yields 7.02%! Time to buy?

A positive set of results has put fresh life into the Aviva share price. Harvey Jones says it offers bags…

Read more »

Investing Articles

Can a €500m buyback kickstart the Vodafone share price?

The Vodafone share price has been a loser for investors in recent years, and the dividend has been cut. We…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Should I follow Warren Buffett and sell my favourite shares?

Billionaire US investor Warren Buffett has been selling tons of Apple shares and other stocks of businesses he thinks are…

Read more »