- Mid caps offer more fairly valued growth choice than blue chips
- Some sectors intuitively feel like more of a leap of faith
With the economic outlook turning sour around the world, analysts are having a tough time predicting growth for company earnings. It’s even harder to find growth at a reasonable price. The companies highlighted by our screen this month are from a selection of industries that are not guaranteed to perform well in a recessionary environment, but they reflect the strange set of circumstances we find ourselves in.
Our UK large-cap screen sees packaging company Smurfit Kappa Group (SKG) pass 9/9 tests, but others are struggling to offer a blend of growth and value. The only other company to pass at least seven tests is Hikma Pharmaceuticals (HIK).
In the mid-cap range, Vesuvius (VSVS) has an interesting role in the steel industry, supplying materials that control heat and are therefore necessary regardless of various levels of steel plant output. As Robin Hardy discussed in his recent Alpha report, it could be priced to deliver investors decent total shareholder returns on a two to three-year view.
Also among the mid-caps, Renishaw (RSW), which manufactures analytical instruments and medical devices, also passes 8/9 tests. It narrowly fails the requirement to have a three-year forward price to earnings growth (PEG) ratio of below one times (the figure is currently 1.1 times).
Recruiters Hays (HAS) and Page Group (PAGE) both pass 7/9 tests. The tight labour markets have favoured recruiters, but this hardly feels like a defensive sector should economies go into recession next year.
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