Santander
The strategy adopted recently by Santander (LSE: BNC) (NYSE: SAN.US) appears to be a very sound one, and could lead to considerable outperformance of the FTSE 100 over the medium to long term. In fact, Santander’s decision to strengthen its balance sheet via a share placing should enable investor sentiment to improve significantly following the bank’s share price fall of 18% in the last year, as the market regains confidence in the company’s long term viability.
In addition, Santander also offers market-beating earnings forecasts at a very appealing price. For example, while the FTSE 100 growth rate is in the mid to high single digits, Santander is expected to see its bottom line rise by 14% this year and by a further 13% next year. This puts it on a price to earnings growth (PEG) ratio of just 0.9, which indicates that its shares could outperform the FTSE 100 moving forward.
Reckitt Benckiser
Shares in Reckitt Benckiser (LSE: RB) are flat today despite the company reporting 5% like-for-like sales growth in its first quarter update. In fact, the company’s performance has been strong in the last three months, with it posting 4% sales growth in the US and Europe, and 6% growth in developing markets, which shows that the macroeconomic outlook in the developed world is starting to improve. As such, Reckitt Benckiser appears to be on-track to meet its 3% earnings growth forecast for the current year.
However, this level of growth is hardly index-beating and, with Reckitt Benckiser trading on a price to earnings (P/E) ratio of 24.8 versus 16 for the FTSE 100, it may not be able to continue the outperformance of the last year that has seen its shares rise by 15% more than the FTSE 100.
Old Mutual
Shares in Old Mutual (LSE: OML) have easily outperformed the FTSE 100 in the last five years, with them being up 72% versus 23% for the wider index. A key reason for this has been the growth rate in Old Mutual’s earnings, with the company expected to post earnings numbers this year that are an incredible 71% higher than they were five years ago. And, given the challenges faced in the sector and the global economy during the period, that is a stunning rate of growth.
Looking ahead, Old Mutual has a great chance of beating the wider index over the medium to long term. That’s because it offers growth at a very reasonable price, with it having a PEG ratio of just 1 at the present time, which when you consider that the FTSE 100’s PEG ratio is over 2, provides evidence of the excellent value for money that is on offer at Old Mutual.