When it comes to long-term share price gains, the market seems to be most interested in those companies that can grow their bottom lines at the fastest rates. Sure, with interest rates at rock-bottom and looking set to stay that way for a good while yet, it's of little surprise that Aussie investors are craving a decent yield.
However, if it's capital growth you're after then buying stocks that come with super earnings growth prospects at a reasonable price seems to be the most direct route to success. With that in mind, here are two that seem to fit the bill perfectly.
Senex Energy Ltd
With shares in Senex Energy Ltd (ASX: SXY) being a major disappointment during the course of 2014, they now trade at an attractive price. For instance, after seeing its share price fall by 25% since the turn of the year, the oil and gas producer now has a price earnings (PE) ratio of just 13.8. This is considerably lower than the ASX's PE of 15.8 and highlights that there is potential for an upward re-rating.
However, where the real potential lies is with regard to the company's earnings growth forecasts. That's because Senex Energy is due to increase its bottom line by 118% in the current year and by a further 27.8% in the following year. This is an extremely strong rate of growth and shares in the company are not priced for it.
Indeed, when the P/E ratio and growth rate are combined, it gives a price to earnings growth (PEG) ratio of only 0.21. This shows that Senex offers growth at a very reasonable price.
Sundance Energy Australia Ltd
Meanwhile, 2014 has been far more successful for investors in Sundance Energy Australia Ltd (ASX: SEA). Its shares are up 34% since the turn of the year, which easily beats the 4% gains made by the ASX over the same time period.
However, there could be much more to come. That's because Sundance Energy is all set to deliver earnings growth of 78.6% in the current year and 179% next year. These are stunning growth rates and the market doesn't appear to be pricing them in.
For instance, Sundance Energy has a P/E ratio of just 20.5. Sure, that's higher than the ASX's P/E of 15.8, but when it's combined with Sundance Energy's forecast growth rate, it equates to a PEG ratio of just 0.17.
This indicates that Sundance Energy could prove to be a star performer over the next couple of years.
