When it comes to investing past performance is no guide to future performance, but it often provides an excellent insight as to what businesses are performing well and what businesses investors might want to avoid.
Markets are also forward looking which means that rising share prices are also a lead indicator of expectations for a strong 12 months ahead which may, in turn, deliver more strong profit and share price growth.
It's worth paying attention to the last financial year's top performers then, as it's not out of the question that they go on to be the coming financial year's top performers again. Remember, when it comes to investing it's much easier to focus on what won't change, rather than what might change.
So, let's take a look at the companies below and consider whether they may have room to run higher.
A2 Milk Company Ltd (Australia) (ASX: A2M) shares climbed 116% over FY 2017 after multiple profit upgrades thanks to strong sales of its infant formula in China and a2-only-protein milk in Australia. I expect the growing popularity of a2-only-protein products may deliver stronger-than-expected sales in FY 2018 and think the stock's growth story remains attractive when selling for $3.80 per share.
Aristocrat Leisure Limited (ASX: ALL) shares climbed 65% over FY 2017 as its pokie machine sales accelerated across Australia, the U.S. and Asian markets. Its market-leading technology provides a moderate competitive advantage as demonstrated by the stock's 700% growth over the past five years. Aristocrat Leisure shares are now priced to perfection and the stock looks a hold for now.
Qantas Airways Limited (ASX: QAN) shares were up 107% over FY 2017 thanks to a falling fuel bill, operational cost cutting, and robust ticket demand supported by its loyalty schemes across domestic routes in particular. Analysts are increasingly optimistic over its profit outlook and over the short term the stock could head to new record highs. However, I'm not a buyer of Qantas shares, even though I expect oil prices are in a long-term bear market.
Costa Group Holdings Ltd (ASX: CGC) shares have climbed 77% over the past year as the fruit and vegetable grower forecasts around 25% net profit growth for FY 2017. The group is harnessing growing demand for healthy foodstuffs like blueberries, avocadoes and oranges. The stock trades on 61x trailing earnings, which looks expensive despite the forecast growth.
Corporate Travel Management Ltd (ASX: CTD) shares have climbed 63% over the past year as the founder-led group forecasts underlying EBITDA for FY 2017 to be slightly more than 40.6% above the prior year. That is some blockbuster growth via a mixture of organic new client wins and acquisitions. Selling for $23.16 the stock might be good value given the potential for more strong growth in FY 2018, although it's not likely to repeat FY 2017's phenomenal effort.
Monadelphous Group Limited (ASX: MND) shares are up 86% over FY 2017 as the mining services and engineering business enjoyed stronger global commodity prices. This has resulted in a number of significant new contract wins with the likes of Woodside Petroleum Limited (ASX: WPL) and attracted bargain hunters to the shares. However, I'm not a buyer of Monadelphous shares.
Of the above I would probably prefer Corporate Travel on current valuations, although in the interests of disclosure I do own shares in the business myself.
