If you're looking for some "safer" stocks that are likely to provide solid earnings growth, then you're bound to find some quality Australian companies. However, many of these companies appear to be fully priced, providing investors with little room for capital gains.
Investors who are forward-looking should therefore be cautious when it comes to paying for growth. These investors should look for businesses that are likely to outperform the market in the years to come, whilst paying the right price for the growth being offered. The following three companies are relatively safer growth stocks and are selling at irresistible prices.
1. JB Hi-Fi
JB Hi-Fi (ASX: JBH), the specialty electronics retailer, has had a much sweeter run than many of its leading Australian rivals, given the rather weak consumer confidence surrounding the economy. However, there is much more for investors to be happy about when it comes to growth.
JB Hi-Fi has recently seen potential for 25 more JB Hi-Fi Home stores than its initial guidance. These additional stores will improve bargaining power with its suppliers, lower costs and therefore improve margins. Australia's recent housing boom also complements JB Hi-Fi's store expansions, as it drives demand for the retailer's white goods and other housing-related products. These are strong long-term tailwinds that should drive earnings higher and make investor portfolios skyrocket in the future.
JB Hi-Fi's share price has retracted slightly in the past few months but I think this represents a great opportunity for investors to buy and enjoy some sweet returns.
2. Select Harvests
Select Harvests (ASX: SHV) is one of Australia's leading almond producers, with exposure throughout the entire almond value chain. Global demand for almonds continues to grow at about 8% per annum and this will continue to increase because of healthier eating patterns and a spike in Chinese demand.
This strong and persistent demand positions Select Harvests to grow earnings for the years to come. Furthermore, the recent drought in California has tightened up almond supply, giving Australian suppliers a chance to take advantage of firmer prices.
Select Harvests trades on a price-to-earnings ratio of 10.9, which is cheap considering double-digit analyst growth forecasts. If I want attractively priced growth, Select Harvests will definitely be a stock that I would consider adding to my portfolio.
3. Incitec Pivot
Incitec Pivot (ASX: IPL) manufactures industrial explosives and fertilisers for agriculture and mining companies like Rio Tinto and BHP Billiton. The chemicals and fertilisers that are offered by Incitec are required in the agriculture industry. As a result, Incitec has a very bright future to look forward to, since our increasingly larger global population and rapid industrialisation of developing economies like China represent a significant demand driver for almonds, which Incitec can leverage. This allows it to offer some serious growth in the next few decades.
Incitec has also been eyed by companies such as Wesfarmers as a potential takeover target, although this has been talked about for quite a long time.
Trading on an attractive price-to-earnings of 15.5 and holding a modest debt position, Incitec is all set to add that extra spice to your portfolio.
