Since the start of the year, shares in Prudential (LSE: PRU) have fallen by around 8%. Clearly, that’s disappointing and with doubts surrounding the future growth rate of the Chinese economy, many investors may feel as though the company has lost its lustre.
However, it continues to offer excellent long-term growth potential. Certainly, the Chinese economy may not be growing as quickly as it once was, but its transition towards a consumer-focused economy should be good news for Prudential. That’s because financial product penetration is likely to increase – especially since the number of middle income earners in the world’s second largest economy is forecast to rapidly rise.
In the short term, Prudential offers earnings growth of 9% in the next financial year and with its shares having a price-to-earnings-growth (PEG) ratio of just 1.1, they could deliver impressive capital gains. Alongside this, Prudential has a yield of 3% and could become a top-notch yield play as dividends are covered 2.8 times by profit.
Also falling since the turn of the year have been shares in Barclays (LSE: BARC). Its dividend cut hurt investor sentiment, but it could recover in the coming months and years if Barclays can deliver on its impressive forecasts. For example, it’s expected to record a rise in earnings of 41% next year and although its bottom line is due to fall by 4% this year, Barclays’ net profit is still set to be 35% higher in 2017 than it was in 2015.
This rapid rate of growth has the potential to boost investor sentiment and push the bank’s share price higher. And with Barclays trading on a price-to-book-value (P/B) ratio of just 0.4, it offers significant capital gain prospects. Certainly, there are risks to the bank from a turbulent global economy and with it having a new management team, changes are likely. Still, with such a wide margin of safety, Barclays appears to be a worthwhile buy for long-term investors.
Proactive and profitable
Admiral (LSE: ADM) has risen since the turn of the year and now trades on a relatively rich valuation. In fact, following its 17% rise year-to-date, Admiral has a P/E ratio of 18.3 and this may lead a number of investors to think that it’s worth avoiding. Furthermore, with Admiral’s management team changing this year due to the retirement of its long-time CEO Henry Engelhardt, it could be viewed as an uncertain period for the business.
However, Admiral’s business model remains highly lucrative and its new CEO is a co-founder and current COO of the business. In addition, Admiral is expected to record growth in earnings of 6% next year. And with it having stolen a march on many rivals through its proactive approach to pricing, it seems to be well-positioned to deliver further growth over the medium-to-long term. Due to its dividend yield being 5.8%, it remains a highly appealing income play, too.