Investors need to keep looking to the horizon for new growth stories. Sometimes you can see them around you in town, but there are some that require a little digging to uncover. Here are three companies that could offer your portfolio a boost.
The engineering and asset management service company Logicamms (ASX: LCM) is diversified across the mining, oil and gas and infrastructure industries. Mining service still makes up 57% of turnover, and its strategy to offset the downturn in mining is to increase contracts for brownfield operations to maximize outputs and drive extra production and revenue for customers.
Service to oil and gas now is about 30% of its business, up from 20% last year, making it more diversified, and allowing it to take advantage of the growing oil, gas, and coal seam gas movement Australia is experiencing.
Revenues and profits have been rising, and return on equity is 14%. Profit margins are still under 10%, but analyst forecasts for earnings are indicating steady earnings growth. Debt is very low. Its share price has just hit a new yearly high, and has broken through its $1.70 price resistance level set back in April 2011.
Energy Action (ASX: EAX) manages and reduces energy bills for businesses, and operates the Australian Energy Exchange, through which energy suppliers can bid to supply an organisation’s energy by using a reverse auction. In addition, it helps companies to reduce and manage their energy consumption, cutting down on a common expense that is usually seen as a fixed cost for businesses.
It listed in 2011, but has been in business since 2000. With net profit margins in the low 20%s and return on equity at 36%, the business has no debt. Hitting a new high of $3.80 in September, it now has a price-earnings ratio of 19.7, yet with 21% earnings growth, that is not too far out of line. It may retest its $3.50 price support level, so that may be a better time to gauge its upward trend.
Titan Energy Services (ASX: TTN) specialises in providing field operation services for oil and gas companies involved in coal seam gas (CSG) development. It supplies portable camps, drilling services/logistics and catering.
The prospect of more CSG drilling and development in New South Wales has increased following the backing of the new Industry Minister Ian Macfarlane, who wants the state’s CSG industry to catch up with Queensland. This Brisbane-based company can take this opportunity to expand its business and take on more contracts.
Since listing in 2011, revenue has more than doubled to $72.4 million compared to last year’s $33.4 million. Net profit margin is 12.5%. The business potential has caught the eye of share traders, sending its share price up six times in the past year, peaking around $3.05 this month. It has pulled back to about 9% currently, and stands at 12 PE ratio. After such a run up, it would be better to let it retest lower prices like $2.50 or even its previous $2.00 peak it gapped up to in July.
It is always educational to look over up and coming companies that are meeting the needs of customers and turning a good profit at it. Noticing their current strength and potential is only the start in your investigation.
You have to dig deeper to see how these businesses exactly make their money, verifying whether the story is a sustainable one, and what kind of growth prospects its industry has currently.
Taking the time to read some business reports, catch up on company news, and read more about the industry only takes a couple hours each week for each company. It’s time well invested to make sure your investment is prudent.
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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.