3 growth stocks at reasonable prices

Past track records can be fair indicators of future performance.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When we compare and judge stocks, we can use all kinds of ratios and statistics to separate the good from the bad. Yet when you find a good one, what’s a good price to pay for them? You can base it on past performance or forecast growth.

That is the dilemma every investor has to go through when considering buying a stock.

The tried and true price/earnings ratio is an easy and, unfortunately, subjective number that investors can use. Usually the one you see quoted most with a stock’s price is based on the most recent annual earnings. It’s helpful when looking at several companies in the same industry to get a general sense of relative value.

The trouble is that the earnings data is from the most recent year only and doesn’t reflect any change, real or perceived, that may be coming to the company’s business. We could use a forward expected earnings value, which many people do, but if people can’t reliably predict what future earnings will be even just one half-year ahead, then the ratio is flawed at best. One bad year could follow one great year, or vice versa and the ratio goes awry.

Here are three companies with great earnings per share growth in the past year – at a higher percentage rate than their current PE ratio.

Credit Corp Group Limited (ASX: CCP)   ($9.13)

One-year earnings per share (EPS) were up 19.4% and its PE is 12.2

TPG Telecom Ltd (ASX: TPM)   ($5.82)

One-year EPS grew 63% and its PE is 26.9

Primary Health Care Limited (ASX: PRY)   ($4.67)

One-year EPS were up 28% and its PE is 14.4

Foolish takeaway

Our only practical way to say a price is reasonable or too high is to know the history of companies, follow their progress closely and be willing to pay a reasonable price for good growth.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »