While predictions regarding the performance of the ASX in 2015 make for an interesting read, whatever the direction it moves there will undoubtedly be winners and losers.
One way of improving your chances of picking the winners is to unearth stocks that offer a combination of strong growth potential and an appealing valuation. That way, if the company's earnings do disappoint somewhat, there is a margin of safety built in to its share price. And, if forecasts are met (or even exceeded), the company's share price could make strong gains.
With that in mind, here are three stocks with stunning growth potential and which trade at great prices.
Oil Search Limited
Having fallen by 18.5% from November to mid-December, many investors were concerned about Oil Search Limited's (ASX: OSH) performance. After all, such a large fall hurts investors' bottom lines but since then, shares in the oil and gas play have bounced back so that they are down just 1% in the last year.
Part of the reason for their relative strength (when compared to many of their sector peers) is the stunning growth prospects that are forecast in the current year. Oil Search is expected to deliver bottom line growth of around 40% this year, which is clearly impressive and is mainly a result of its new exposure to LNG. Not only does this mean higher profit potential but, since the PNG LNG project (in which Oil Search is a partner) is already under contract, it means that revenues should be relatively stable, too.
With Oil Search trading on a PEG (price-to-earnings growth) ratio of just 0.26, it seems to offer excellent growth at a very reasonable price and, as such, could be a top performer this year.
Origin Energy Ltd
With the share price of Origin Energy Ltd (ASX: ORG) having fallen by 16% in the last year, its yield of 4.2% has caused many investors to wonder whether it is now an appealing income play. After all, its dividend is forecast to rise by 40% in the 2016 financial year and this means that it could be yielding as much as 5.9% next year.
Such strong dividend growth is made possible by a bottom line that is expected to rise at an annualised rate of 25.2% over the next two years. And, with a P/E ratio of 17.8, this equates to a highly attractive PEG ratio of just 0.71.
Certainly, further changes in the prices of commodities mean that Origin Energy's share price is likely to remain volatile. But, with it offering exceptional growth at a bargain price, it seems to be worth buying for the medium to long term.
QBE Insurance Group Ltd
Last month was a pleasant surprise for investors in QBE Insurance Group Ltd (ASX: QBE), with the insurance giant generally maintaining its guidance for the full year. This is unusual because in recent years it has gained the reputation of downgrading guidance as it realises that previous forecasts were overly optimistic.
Looking ahead, QBE is expecting to post excellent results in 2015, with its bottom line forecast to rise by around 31% in the current year. This, combined with a P/E ratio of 14.2, means that QBE trades on a PEG ratio of just 0.46, which indicates that shares include a significant margin of safety.
Of course, with QBE's relatively new management team currently in the midst of restructuring the business, the near term may include further changes and asset disposals. However, with QBE's finances appearing to be relatively sound after an equity raising and debt issuance, it could prove to be an excellent long term performer – especially at such an attractive valuation.
Clearly, finding stocks such as QBE, Oil Search and Origin Energy that may be worth buying is no easy task. That's particularly the case if, like most private investors, you lack the time to trawl through the index looking for the best buys.
