There are a number of stocks that are beating the gains of the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) over the past six months. However, I want to put a spotlight on two companies that I think have much more room to run.
Both have high earnings growth forecasts over the next several years, so that means investors should be aware their share prices could still rise further in the short term.
— The world's leading Cochlear implant hearing aid producer Cochlear Limited (ASX: COH) has seen its stock rise 23% in the last six months. The market launch of new products in all the company's categories has pushed expectations of much higher revenues in FY 2015.
The company was held back previously due to regulatory approvals, yet once that issue was cleared, orders and sales rose. Second half FY15 sales were especially strong, climbing 28% over the same period a year ago. Some of the pent-up demand was from implant recipients holding off until the latest implant products were released.
Further regulatory approvals for other countries are expected soon, so business expectations are high.
Analyst consensus forecasts have earnings growth rising around 35% annually over the next two years. Consequently, the stock's price-earnings ratio is 37 now. It pays a 3.0% yield partially franked.
I think the company has great growth prospects because its products are in high demand and it was only held back previously by manufacturing issues and regulatory matters.
The stock may seem pricey now, yet with greater earnings going forward, holding a strong healthcare stock like Cochlear could have pleasing returns.
— G8 Education Ltd (ASX: GEM) over the past two years went from about $1.50 a share to $5, all on the back of a steadily growing portfolio of hundreds of childcare and learning centres throughout Australia. The stock has taken a breather recently, yet is still up 11% since April.
The childcare industry is big because of the demand of modern families where both spouses are working full-time. Many of the centres are privately owned, so G8 Education can acquire established businesses for reasonable prices. Just earlier this month, it announced it will acquire 20 more centres. That's on top of the 91 it acquired earlier this year.
Now it is the largest ASX-listed company for childcare. With strong demand and government assistance for providing such services, G8 Education has a lot of room to grow. The stock pays a fully franked 3.0% yield and is priced at 24.2 times earnings.
For a company that usually has earnings growth well in the high 20s or low 30s, it's attractively priced. This is another stock that could go much further, so add it to your stock shopping list.
