Can these growth shares provide high total returns?

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Questions and answers

Finding companies which offer a mix of growth and value is an ever-present challenge for investors. Stocks which have downbeat outlooks may appear to be cheap, but they may also lack a clear catalyst to push their share price higher. Equally, high-growth stocks may lack a margin of safety as investor demand is likely to have pushed their valuations ever higher.

With this in mind, here are two shares which could be worth a closer look. Both of them have improving outlooks, and could offer value appeal for the long term.

Growth potential

Reporting on Tuesday was international aesthetics company Sinclair Pharma(LSE: SPH). The company released a trading update for the first half of the year. It showed further progress is being made as per the company's strategy, with sales rising by 16.3% versus the same period of the prior year.

Looking ahead to the second half of the year, the company has noted several potential catalysts which could lead to an improving top line. For example, order phasing, the seasonality of sales in Brazil and strong anticipated US growth could all boost the company's financial performance. The FDA label change for Silhouette Instalift is also positive news for the company and should make training simpler and cheaper. Meanwhile, the acquisition of the Refine system should also improve the growth outlook for the overall business.

Despite Sinclair Pharma being a lossmaking business at the present time, it is expected to report a black bottom line next year. This could prove to investors that its strategy is bearing fruit and may lead to a higher valuation. Beyond next year, the company appears to have a grip on its costs and alongside strong revenue growth this could lead to rising profitability over the long run.

Consistent performer

Also offering growth potential for the long term is sector peer Alliance Pharma(LSE: APH). The company has a wide range of products which have historically provided a very consistent revenue stream and rising profitability over recent years. This means that the stock is relatively reliable and stable, which could make it popular if the wider market experiences a negative period following the bull run of recent months.

Looking ahead, Alliance Pharma is expected to report a rise in its earnings of 5% this year and 11% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 1.1, which suggests that it offers a wide margin of safety.

As well as this, it has strong income potential. Dividends are currently covered 3.1 times by profit and this suggests they could move higher at a brisk pace. With a dividend yield of 2.5%, Alliance Pharma could be a sound income play for the long run. With inflation moving higher, this could make it a worthwhile growth, value and income play.

Millionaire potential

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Peter Stephens owns shares of Alliance Pharma. The Motley Fool UK has no position in any of the shares mentioned. 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.