While a cash ISA offers a return of 1.5% per year, a number of FTSE 100 shares could generate significantly higher returns in the long run. Certainly they may be riskier, and the risk of loss is ever present. However, with a number of companies offering high-growth potential and low valuations, now could be the right time to consider investing in large-cap shares.
With that in mind, here are two FTSE 100 stocks that could generate improving investment performances in the long run.
Improving prospects
Releasing results for the 2018 financial year on Monday was insurance specialist Hiscox (LSE: HSX). Profit before tax tripled to $137.4m, recording a strong underwriting result and experiencing a busy year for claims. Gross premiums written grew by 15%, with double-digit growth recorded in all segments. Its Hiscox London Market returned to growth after three years of disciplined cycle management.
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Hiscox Retail wrote over $2bn of premiums and served one million customers for the first time. The company continues to grow well within its chosen retail segments, with its small market shares meaning the size of its growth opportunity remains high.
Looking ahead, the company is forecast to report a rise in net profit of 19% in the current year. This suggests it has a sound strategy, while a price-to-earnings growth (PEG) ratio of 1 indicates it could offer good value for money compared to many of its FTSE 100 industry peers. As such, now could be an opportune moment to buy it after what has been a volatile period for its share price.
Turnaround potential
Also offering growth at a reasonable price is educational specialist Pearson (LSE: PSON). The company has experienced a challenging number of years, with its financial and operational performance having been disappointing. In response, it’s putting in place a revised strategy which includes asset disposals and a focus on digital growth.
So far, its strategy appears to be working well. Recent results showed its financial performance has the potential to improve. In the current year, it’s expected to report a rise in net profit of 12%. Even though its shares have risen sharply in the last year, the stock still offers a PEG ratio of 1.3. This indicates that there may be a margin of safety on offer.
Clearly, Pearson is in a period of intense change which may cause it to have a relatively uncertain outlook. Certainly, there are more stable stocks in the FTSE 100, while a cash ISA offers a significantly reduced risk of loss. However, with the company appearing to be well-placed to benefit from increasing demand for its products over the long run, it could generate impressive returns. As such, from a risk/return perspective, it could hold significant appeal as it delivers on its turnaround strategy.
