However, the Tesco (LSE: TSCO) share price appears to offer those three attributes at the present time. It seems to have a sound strategy which could lead to a rising bottom line, while its valuation also suggests it may offer a margin of safety.

Of course, it’s not the only stock which could have investment potential. Releasing news on Wednesday was Dalata Hotel Group (LSE: DAL), which seems to have a bright future. Together, the two companies could help an investor to overcome a State Pension that, on its own, seems to be inadequate versus the current cost of living.

Improving outlook

Ireland’s largest hotel operator said this morning it has exchanged contracts to acquire the long leasehold interest of a hotel under development in London for a total consideration of £91m. The transaction is conditional on the completion of the hotel to an agreed specification, with it expected to be operational towards the end of the current year.

The news appears to have been well-received by investors, with the company’s share price rising by over 2%. It provides the business with a presence in a key central London location which is likely to experience high demand over the long run.

With Dalata expected to post a rise in earnings of 4% this year, and 14% next year, its investment prospects appear to be upbeat. Despite this, it trades on a price-to-earnings growth (PEG) ratio of 1.1, which suggests its capital growth potential is high. As such, now could be the right time to buy it for the long term.

Growth opportunity

The prospects for the Tesco share price also appear to be upbeat. The company’s strategy seems to be providing it with an improving growth rate, with areas such as investment in fresh produce, customer service initiatives, and a ruthless focus on cost control helping to refocus the business on its core areas.

This, in turn, seems to be providing it with a competitive advantage versus peers following a long period of diversification which saw the company take its eye off the UK grocery space in favour of non-core opportunities such as technology.

Looking ahead, Tesco is expected to post a rise in earnings of 19% this year, followed by further growth of 20% next year. It trades on a PEG ratio of 0.8, which indicates that it offers growth at a very reasonable price.

Dividends are due to rise by 43% next year, which puts the stock on a forward yield of around 3%. Since payouts are expected to be covered 2.2 times by profit, they seem to be highly affordable. As such, the company could become a solid income play, with capital growth potential high due to its low valuation and expected earnings growth.

Profitable expansion

Compared to a year ago, revenue lifted 24% and adjusted earnings per share shot up almost 41%. It seems clear that the firm is doing something right because it is expanding fast and maintaining profitability along the way.

The company listed on the stock market in March 2014 raising €265m to finance an ambitious expansion strategy. Since then, Dalata has acquired 24 hotels located in Ireland and the UK. But Dublin is the biggest operating area and delivered around 57% of revenue during the period with the rest splitting almost evenly between regional Ireland and the UK.

The fast pace of expansion continues with the firm today announcing an agreement to lease a new 300-room hotel to be built in Manchester under the Clayton brand. It is planned for opening during 2020. The company also bunged more than €100m at acquiring freehold interests and new hotel purchases. Meanwhile, during the period more than €17m went into new builds and extensions, and around €11m into the ongoing refurbishment programme.

Borrowings under control

It’s a capital-intensive pursuit and raises the question of debt. The most-recent reckoning shows borrowings on the balance sheet running just over €267m, which compares to half-year operating profit a little under €38m. I think that looks reasonable considering much of the debt will be backed by property assets.

City analysts following Dalata expect earnings to balloon 69% this year and to grow by 11% during 2018. The outlook is positive and the pace of expansion is brisk. I reckon Dalata deserves your attention and analysis right now.

Online gaming company 888 Holdings (LSE: 888) also delivered interim results today and the figures look good. At constant currency rates, revenue lifted 3% compared to a year ago, adjusted basic earnings per share are 32% higher and net cash from operations shot the lights out with a 183% rise.

Strong balance sheet

I like the firm’s strong balance sheet, which carries no debt and a cash pile of around US$153m. There’s money to be made offering online casino, poker, bingo and sport betting services. Despite not being a buyer of such services myself, I can see that many people do love gaming and gambling, which leads to a strong business for 888. The firm generates 71% of revenue from the regulated market with around 39% coming from the UK, 49% from the rest of Europe, 8% from the Americas and 4% from the rest of the world.

The company says it achieved today’s good results despite adverse currency movements and exiting several markets such as Australia and Poland. The outlook is good and progress is being driven by strong operational momentum across several key products. City analysts following the firm expect reported earnings to advance 6% this year and 11% during 2018.

Operational momentum looks compelling with 888, but a recent £7.8m fine from The UK Gambling Commission over “significant flaws” in the firm’s social responsibility processes underlines how strict the regulatory environment has become. I’m hopeful that 888 has learnt its lesson and will go on to serve its investors well from here.

Dalata — which controls the Clayton Hotels and Maldron Hotels brands — sources almost two-thirds of total profits from Dublin alone, but is embarking on exciting expansion elsewhere to keep the bottom line booming.

Chairman John Hennessy commented this month that “following another year of significant growth in the size of our portfolio and earnings in 2016, trading performance in the first four months of 2017 has been marginally ahead of expectations.”

And Dalata keeps on investing heavily to facilitate future growth. The company has 1,200 new hotel rooms in the pipeline, and has a variety of hotels across The Emerald Isle and the UK due to be opened through the course of 2018.

More specifically, Dalata has its eyes on creating a much larger footprint in Britain, as well as opportunities to buy the freeholds of some of its sites in Ireland to avoid unfavourable rent reviews later down the line. The hotelier this month bought the freehold of certain elements of the Clayton Hotel Cardiff Lane and Clarion Hotel Liffey Valley sites in Dublin for €62.5m.

Get your head down

Dalata has seen earnings detonate in recent years and, if broker forecasts are to believed, investors can expect the bottom line to keep on surging.

A 70% earnings advance is chalked in for 2017, resulting in a P/E ratio of 15.9 times. This figure nudges marginally above the widely-regarded value benchmark of 15 times but is great value given the prospect of further, and sustained, profits growth (an extra 14% rise is expected for 2018 alone).

While Dalata has seen its share price continue its heady ascent (indeed, the hotelier hit another record peak of 450p per share just today), I expect the stock to keep moving higher as earnings steadily expand.

Pumping powerhouse

The City is also in agreement that Spirax-Sarco Engineering (LSE: SPX) should deliver solid earnings expansion in the years ahead. A 17% advance is predicted for 2017, and is expected to be followed with an 8% rise in 2018.

The steam pump play advised this month that an “improving economic background” had helped organic sales in the first four months of 2017 rise above the same period a year ago. And more specifically, Spirax-Sarco has seen sales at its Steam Specialties division improve across all territories, particularly in the hot growth markets of Asia as Chinese and Korean demand takes off.

And excitingly for growth hunters, Spirax-Sarco noted that it intends to “prioritise investments for growth over further margin expansion.” The company sucked up German boiler system specialist Gestra earlier this month for £160m.

I reckon Spirax-Sarco remains a terrific engineering pick irrespective of its high forward P/E ratio of 26.1 times.