With the world economy offering an upbeat outlook, there are a number of stocks that could be worth buying at the present time. Investor sentiment seems to be robust, and this could lead to rising share prices in future.
However, deciding which stocks could offer the best performance could prove to be difficult. Valuations are higher than they have been for some time, and there remain risks to the future prospects of companies operating in various geographies. With that in mind, here are two shares that seem to offer favourable risk/reward ratios.
Improving performance
Reporting on Friday was global music and audio products company Focusrite (LSE: TUNE). The company’s first-half results showed that there has been growth across a wide range of product groups and regions. Sales of its Scarlett and Launchpad ranges have grown strongly, with higher demand over Christmas being a key reason for this.
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Revenue is expected to rise from £32m in the first half of the prior year to around £38m in the first half of the current year. And with the business delivering strong cash conversion, it means it has a net cash balance of £19.7m. As such, it appears to be in a strong position to generate further growth.
Although there are headwinds in the music retail industry, the overall prospects for the industry remain positive. Innovation could prove to be the key to growth, as consumer tastes change rapidly and new technology can prove to be disruptive. In this area, Focusrite appears to be well-positioned and this could lead to strong growth over the long run.
Looking ahead to next year, the company is expected to report a rise in earnings of 7%. This could help to boost its share price performance after a rise in its valuation of 75% during the last year.
Steady growth
While the feeling among many investors is one of optimism at the present time, that could quickly change. Risks continue to face the world economy, with Brexit just a year away and inflation potentially set to cause interest rates to rise. As such, seeking out stocks that are able to offer dependable growth could be a shrewd move.
One such company is beverages stock Diageo (LSE: DGE). The nature of its business means that its earnings profile is usually relatively robust. Demand for alcoholic beverages often remains high even during difficult or uncertain periods for the economy. As such, it may offer consistent share price growth during a mix of economic conditions.
With Diageo forecast to post a rise in its bottom line of 6% this year, followed by 8% next year, it appears to offer an impressive outlook. With exposure to various geographies across the globe, it is well-diversified. And with an efficiency programme in place, its financial performance may improve beyond next year. As such, it could be worth buying today for the long run.
