One of the most challenging aspects of being an investor is unearthing stocks with clear catalysts which could push their share prices higher. Part of the difficulty is that doing so is not an exact science and there can be a wide range of attributes which make a company's share price move higher.
For example, diversified financial company Suncorp Group Ltd (ASX: SUN) has a clear catalyst in terms of its earnings growth prospects. The banking and insurance specialist is expected to increase its bottom line at an annualised rate of 10% during the next two years. This on its own has the potential to stimulate investor sentiment in the company, since if such a growth rate is delivered then it is likely to be far ahead of the wider index's growth rate. However, with Suncorp having a price to book value (P/B) ratio of just 1.2 versus 1.75 for the wider insurance sector, there is huge scope for an upward rerating.
In addition, Suncorp is focusing on becoming a more efficient business and recently stated that it is on-track to meet ambitious annual cost savings in the coming years. For example, annual cost savings of $170m are due to be delivered by 2018 as a result of a technology upgrade and, with Suncorp being in great financial shape as it changes its CEO, now appears to be the right time to buy a slice of it.
Wealth management company AMP Limited (ASX: AMP) also has upbeat growth prospects which could positively catalyse investor sentiment in its shares. After a challenging five-year period that has seen AMP's net profit fall by 5% per annum, it is now expected to post an annualised rise in earnings of 20% over the next two years. This, when combined with a price to earnings (P/E) ratio of 15.6, equates to a price to earnings growth (PEG) ratio of 0.78, which is well below the ASX's PEG ratio of 1.42.
Furthermore, AMP is enjoying a prosperous year despite the ASX's troubled performance. In the company's most recent update, it announced that assets under management had increased by 13% versus the prior period. And, with a beta of 1.68, any upturn in the ASX's performance could cause AMP's share price to soar.
Having been engaged in substantial M&A activity, Transurban Group (ASX: TCL) looks set to post earnings growth which has the potential to boost investor sentiment. The toll and tunnel operator is due to post a rise in its bottom line of over 71% per annum during the next two years and, with it having a PEG ratio of 0.81, its shares could continue the run that has seen them rise by 30% in the last year.
Interestingly, it is Transurban's relative stability which may cause demand for its shares to increase. Certainly, last year's fall in earnings of 30% was disappointing but, in the last decade, Transurban has grown its bottom line at an annualised rate of over 15%. Given the uncertainty surrounding the Aussie economy and the future performance of the ASX, this resilience could be a useful ally for Transurban's investors.
