With St. Leger Day upon us, now could be a good time to buy shares in high-quality growth stocks. That’s because, as the old saying goes, St. Leger Day is when a lot of investors return from their summer hiatus and there can be an increase in demand for shares. In turn, this can push share prices up after a summer barren of any capital growth (the FTSE 100 made no gains, for instance, between May and September this year).
Bearing this in mind, here are three high-quality stocks that appear to fit the bill as strong growth plays.
ARM
Technology tends to be a hugely unreliable sector when it comes to bottom line growth. Certainly, there are good times, but when the bad times come they can be very, very bad. However, ARM (LSE: ARM) is perhaps the one UK technology company that is a little different in this respect. That’s because it has a relatively reliable earnings growth profile, with the company delivering strong growth in each of the last four years, and also being forecast to continue to do so in the next two years.
For instance, ARM is due to increase earnings by 10% this year and by 22% next year, both of which are hugely impressive numbers. With shares in the company currently trading on a price to earnings (P/E) ratio of 41.7, it equates to a price to earnings growth (PEG) ratio of 1.5. This highlights reliable growth at a reasonable price.
Unilever
After a disappointing start to the year, shares in Unilever (LSE: ULVR) have recovered strongly to post gains of 9% year-to-date. However, there could be more to come. Certainly, 2014 is set to be something of a disappointment when the company reports its full-year results, with earnings due to be only 1% higher than they were in 2013.
However, 2015 is forecast to be a much better year for the company, with the bottom line pencilled in to increase by 9%. This shows that Unilever remains a solid growth play and, although shares in the company have a P/E ratio of 20.9, they have traded on much higher ratings in the past. This shows that, as well as earnings growth, there could be an upward rating revision, too.
Santander
The most striking aspect of Santander (LSE: BNC) as an investment is undoubtedly its yield. It currently stands at a whopping 7.2%. However, there’s much more to Santander than just a high yield. For instance, it is forecast to increase earnings at a rapid rate, with the bottom line set to rise by 23% in the current year and by 21% next year.
Furthermore, shares in Santander do not appear to be priced for growth. They currently trade on a P/E of 15.9 and, although this is a premium to the FTSE 100 (which has a P/E of 13.9) it still represents good value for money. That’s because when it is combined with the company’s forecast growth rate it equates to a price to earnings growth (PEG) ratio of just 0.7. This appears to represent growth at a very reasonable price.