Today I am looking at three firms with terrific long-term prospects.
Insurer on the up
Life insurance mammoth Prudential (LSE: PRU) has long been a reliable selection for those seeking chunky earnings growth year after year. The company has seen the bottom line swell at a compound annual growth rate of 11.7% during the past five years alone, and the City expects this terrific momentum to continue in the years ahead.
And with good reason — the London company has proved itself extremely effective at adapting its product ranges to to key demographic, legislative and technological changes, while its decision to expand its tentacles in Asia is also paying off handsomely. Prudential saw new business profit from this region gallop 24% higher between January and September, to £976m.
The number crunchers expect Prudential to enjoy earnings growth of 14% in 2015 and 9% next year. Consequently the business is currently dealing on a very attractive P/E ratio of 12.4 times for 2016, comfortably below the value watermark of 15 times.
Retailer poised to roar
Like Prudential, I believe that Marks & Spencer (LSE: GSK) is also a great way to tap into the huge potential of emerging markets.
Sure, the retailer may have slowed planned store openings for the next few years in light of recent macroeconomic turbulence — ‘Marks and Sparks’ had planned to open 250 new outlets between 2014 and 2017. But a more measured approach to international expansion should still deliver chunky returns, in my opinion.
Indeed, Marks & Spencer has targeted the high-growth areas of China and India as the cornerstone to overseas expansion, and is taking a multi-channel approach to unlock the value created by stampeding consumer spending power in the coming years, particularly online.
And with demand for Marks & Spencer’s premium food items steadily powering group sales, too, the City expects the business to record earnings expansion of 8% and 7% in the years to March 2016 and 2017 respectively. A subsequent P/E rating of 14 times for the current period makes the High Street giant great value for money, in my opinion.
Pharma giant on the charge
Pills play GlaxoSmithKline (LSE: GSK) has been a long-running casualty of the ‘patent wars’ that has smashed revenues at the world’s biggest medicine manufacturers. The Brentford business has seen earnings fall in three of the past four years, and a further dip — this time by a chunky 20% — is anticipated for 2015.
But the tide is gradually turning at GlaxoSmithKline thanks to the impressive performance of its R&D team. The company is aiming to start Phase II testing on 30 new molecular entities (or NMEs) and product extensions in 2016 and 2017, and start Phase III work on 20 NMEs and extensions during the period.
The stellar development work of recent years is finally expected to begin to pay off from 2016, and an 11% earnings rise is currently forecasted for next year. I believe a subsequent P/E rating of 15.8 times is great value given GlaxoSmithKline’s vastly-improved earnings outlook, particularly as global healthcare investment should keep on surging.