With that in mind, here are two shares which appear to be undervalued based on their growth outlooks. They may therefore be able to outperform the FTSE 250 over the long run.

Improving outlook

Reporting on Tuesday was insurance and reinsurance specialist JLT (LSE: JLT). The company’s trading statement for the first four months of 2018 showed that it has made a strong start to the year given current trading conditions.

For example, its Global Reinsurance segment has made good financial progress, with the upbeat performances in 2017 in Europe and North America having continued into 2018. Similarly, its Global Employee Benefits division has traded impressively in the period, with Asia returning to growth and the UK continuing the momentum started in 2017.

Meanwhile, JLT’s Global Specialty business has achieved a number of client wins during the period following a change in management team. It expects to generate good organic revenue growth for the full year, with the US Specialty business on track to deliver continued revenue growth.

Looking ahead, the company is forecast to report a rise in its bottom line of 18% in the current year, followed by further growth of 19% next year. Despite such strong growth forecasts, it trades on a price-to-earnings growth (PEG) ratio of just 0.9. This suggests that it offers a wide margin of safety and may be able to outperform the FTSE 250 in future years.

Strong performance

Also forecast to deliver strong earnings growth over the next two years is clothing brand and retailer Superdry (LSE: SDY). The company has been gradually improving its operational capabilities in recent years and now seems to have a solid platform to generate improving financial performance.

Under its current management team it has reorganised its business model and is now set to deliver earnings growth of 17% this year, followed by further growth of 15% next year. However, investor sentiment continues to be relatively weak, with the company’s share price having declined by 7% in the last year. This puts it on a PEG ratio of 0.9 and suggests that it could offer a wide margin of safety.

Certainly, the retail environment in the UK and internationally could experience headwinds if interest rates rise. But with a relatively low valuation, an improving business model and a strong management team, Superdry appears to offer significant growth potential which could allow it to outperform the FTSE 250 in future years.

The post These monster growth stocks could crush the FTSE 250 appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK owns shares of Jardine Lloyd Thompson. The Motley Fool UK has recommended Superdry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With Standard Chartered focusing on improving its compliance function and also on becoming more efficient, its bottom line is likely to gain a significant boost. In fact, Standard Chartered is expected to increase its earnings by as much as 136% in the next financial year. This has the potential to rapidly improve investor sentiment in the bank and with its shares trading on a forward price-to-earnings (P/E) ratio of 15.2, they appear to offer a wide margin of safety.

Shrewd move?

Similarly, buying RBS (LSE: RBS) could be a shrewd move. The part-nationalised bank may have fallen in value by 16% this year, but its financial performance is very much on the up. For example, RBS is due to increase its earnings by around 40% next year and such a rapid rate of growth means that it has a forward P/E ratio of only 11.2.

Furthermore, RBS is expected to rapidly increase dividends per share over the medium term. In fact, its yield is forecast to reach 1.5% next year and with the bank due to pay out only 16% of profit as a dividend, there’s tremendous scope for a rapid rise in shareholder payouts, which could push its share price higher.

Sure of Esure

Similarly, insurance company Esure (LSE: ESUR) could become an increasingly enticing income play. Unlike RBS, it already has income appeal and is expected to yield 4.6% in the current year. However, with dividends being covered around 1.5 times by profit, there’s scope for their rapid rise over the medium-to-long term.

In terms of profitability, Esure is expected to increase its bottom line by 14% in the current year and by a further 19% next year. This puts it on a PEG ratio of only 0.7 and as well as having the potential to improve investor sentiment in the stock, Esure’s rapid profit rise could cause dividends to be increased at an even faster rate than they otherwise would be.

Track record

Meanwhile, fellow insurer JLT (LSE: JLT) could also beat the FTSE 100 in the long run thanks to its upbeat growth forecasts. In the current year JLT is expected to increase its earnings by 7%, with further growth of 19% forecast for next year. These figures could help to improve investor sentiment towards the company following its 13% share price fall over the last year.

This fall has, however, caused JLT to trade on a much keener valuation. It now has a PEG ratio of only 0.7 and with it having increased earnings in four of the last five years, it seems to have a relatively reliable track record of growth. When added to a yield of 3.5%, this marks JLT out as a potential FTSE 100-beating stock.

The post Are Standard Chartered plc, Esure Group plc, Royal Bank of Scotland Group plc and Jardine Lloyd Thompson Group plc on course to beat the FTSE 100? appeared first on The Twelfth Magpie.

More reading

• How much would you need invested for a second income that covers council tax?
• FTSE 100 banks retreat as investors react to political unrest. What lies ahead?
• Here’s how to invest £18,182 in an ISA for a 5.5% dividend yield
• Everybody is talking about Space X but I’m more excited by the NatWest share price
• How much do you need in a SIPP to replace the average £39,039 UK salary?

Peter Stephens owns shares of Royal Bank of Scotland Group and Standard Chartered. The Motley Fool UK owns shares of Jardine Lloyd Thompson. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Clearly, Amlin is a successful business that has delivered a superb level of dividends in previous years. And, with an excellent management team and relatively stable business model, its appeal to rivals is very evident.

However, there are other non-life insurance companies which offer similar attributes. For example, Direct Line (LSE: DLG) trades on a price to earnings (P/E) ratio of just 11.4 and, while its earnings are due to fall by 14% next year, the last few years have shown that the company is capable of delivering upbeat growth numbers as standalone entity.

In fact, Direct Line has posted annualised growth of 12.3% per annum during the last three years and, with its shares offering a yield of 5.8% from a dividend that is covered 1.3 times by profit, it continues to be a superb income play. Furthermore, Direct Line trades on a price to book (P/B) ratio of just 1.7, which indicates that its shares could be acquired at a relatively low valuation.

It’s a similar story with Esure (LSE: ESUR). It currently trades on a P/E ratio of just 13 despite its share price having risen by 17% since the turn of the year. And, like Amlin and Direct Line, it appears to have confidence in its future earnings capacity since it pays out 75% of profit as a dividend, which means that it currently yields 5.7%. Certainly, it has struggled to fully offset the cost of personal injury claims, which put a dampener on its most recent set of results. But, with a sound balance sheet and low valuation, it could be a bid target.

Of course, Jardine Lloyd Thompson (LSE: JLT) has been a very active acquirer in recent years, with its business expanding through a series of purchases since its creation in 1997 (when Jardine Matheson merged with Lloyd Thompson). Today, it remains a very appealing business, with a wide range of divisions operating across the globe. And, with its earnings having risen in each of the last five years, giving an annualised rate of growth of over 10%, JLT appears to be a relatively stable company.

On the face of it though, a bid seems unlikely. That’s because JLT has a P/E ratio of 18.9 and a P/B ratio of 7.4. Both of these figures indicate that it is overpriced but, when it is considered that JLT is expected to increase its earnings by 14% next year, has an excellent track record of growth and could provide diversity to a sector peer, a bid could certainly be possible in the medium term.

So, Direct Line, Esure and JLT all appear to be worth buying and, even if bids do not come along, the returns from all three stocks should be very encouraging.

The post Could Esure Group PLC, Direct Line Insurance Group PLC And Jardine Lloyd Thompson Group plc Be Next After Amlin plc Takeover? appeared first on The Twelfth Magpie.

More reading

• By June 2027, Aston Martin shares could turn £5,000 into…
• £2k invested in Aston Martin shares a month ago would currently be worth…
• Could Aston Martin be one of the best stocks to buy right now?

Peter Stephens owns shares of Amlin and Direct Line Insurance Group. The Motley Fool UK owns shares of Jardine Lloyd Thompson. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.