While Bitcoin may be viewed as offering high capital growth potential by some investors, the reality is that a number of shares could generate significantly stronger returns in the long run. For example, reporting on Friday was supplier of advanced wafer products IQE(LSE: IQE). Its trading update showed that it is making progress with its strategy, while its growth forecasts and valuation suggest that it offers a margin of safety.
As such, now could be the perfect time to buy it alongside another growth stock which also seems to be relatively cheap. In contrast, Bitcoin’s lack of fundamentals and limited real-world use mean that investors may be better off avoiding it.
The trading update released by IQE showed that while it has experienced challenges in recent months, it could offer improving financial performance. By the end of the first half of 2019 it is expected to have completed a two-year investment programme across its operations. That is expected to deliver strong performance across its wireless, photonics and infa-red business units in key sector areas including sensing, energy and connectivity.
Therefore, while adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) in the 2018 financial year of £27m represents a fall of £9.5m on the prior year, the company is expected to post a rise in earnings of 43% in 2019. Despite its improving outlook, the stock has a price-to-earnings growth (PEG) ratio of 0.5, which suggests that it offers a wide margin of safety.
Certainly, IQE continues to be a relatively risky stock to own. The company is making major changes to its business model in what is a fast-changing industry. But from a risk/reward perspective, now could be the right time to buy it in my opinion.
Also offering growth potential which could allow it to outperform Bitcoin is lifestyle brand Superdry(LSE: SDRY). It experienced a rather challenging first half of its financial year, with weak consumer confidence and deep discounting across the sector causing difficult operating conditions. In response, it is investing in an 18-month product diversification and innovation programme which could enhance the appeal of the brand and boost its competitive advantage.
With the company forecast to grow its bottom line by 13% per annum in the next two financial years, it appears to have an improving outlook. Since it trades on a PEG ratio of 0.9, it could offer good value for money when compared to a number of other global consumer goods companies.
Certainly, Superdry is in a period of change, with it seeking to adapt its products and business model to a fast-changing retail space. However, for investors seeking to buy a strong brand while it is trading at a discount to its intrinsic value, it may offer impressive capital growth potential over the long run. As such, it may outperform Bitcoin during what is proving to be a disappointing period for the virtual currency.
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Peter Stephens has no position in any of the shares mentioned. 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.