With the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) opening down 0.8% on Wednesday morning, investors may be starting to get nervous that the easy gains have already been made.
In fact there's good reason to believe that from here on the market is going to struggle to move higher without earnings growth to drive it, given multiples are already at elevated levels.
For investors this means the stocks with the best chances of success are those which can actually deliver strong earnings growth. One of the very best areas to seek out companies which are well placed to deliver above trend growth is amongst the smaller, emerging growth stocks.
Here are five companies which look to fit the bill.
Tassal Group Limited (ASX: TGR) has carved out a niche position with a salmon farming operation based in Tasmania. Its growth outlook is strong thanks to growing demand for its salmon products; one leading broker is forecasting earnings per share (EPS) growth of around 20% and 30% in FY 2014 and FY 2015 respectively.
Blackmores Limited (ASX: BKL) has built itself a commanding position as a leading supplier of vitamins and nutritional supplements in Australia. The company is now turning its attention to Asia where it is making good initial inroads.
Austbrokers Holdings Limited (ASX: AUB) continues its strategy of bolting on insurance broking firms to the group. The stock has been a star performer, with the share price growing 330% in the past decade. While its EPS growth rate is starting to slow, forecasts suggest it will continue to grow above the rate of GDP.
Drillsearch Energy Limited (ASX: DLS) is a $650 million oil and gas producer. With the prices of both commodities ticking higher the near-term outlook for Drillsearch's earnings appears very favourable.
Iress Ltd (ASX: IRE) is best known for its technology platform which is utilised by many Australian brokers for stock trading and data. Less well known is that Iress is increasingly becoming the software provider of choice for financial planners and that the company has growing operations across four other continents! Broker consensus data from Morningstar forecasts Iress will grow its EPS by 49% this year and 11% next year.