2014 has been a mixed year for investors in GWA Group Ltd (ASX: GWA) and Corporate Travel Management Ltd (ASX: CTD), with the former seeing its share price fall by 1% and the latter posting a share price gain of 38% year-to-date. However, does this have any effect on the two companies' valuations, or are GWA and Corporate Travel Management still both worth adding to your portfolio?
Results
On the face of it, recent results released by household fittings company, GWA, were pretty poor. Indeed, net profit fell by 43%, although this doesn't paint the full picture. That's because the company's bottom line was hit by various one-off items, such as a $17 million impairment charge for its Gliderol garage door business. However, earnings growth forecasts for the next two years indicate a much stronger performance, with earnings set to increase at an annualised rate of 16.1% over the period.
GWA's results were in direct contrast to business travel services provider, Corporate Travel Management, which posted a year-on-year increase in underlying profit of 41%, with the top line experiencing similarly strong growth at around 42% for the year. Furthermore, the company's growth forecasts are also very strong, with Corporate Travel Management all set to post earnings growth of around 33.7% per annum over the next two years. Clearly, neither company is struggling for bottom line growth over the short to medium term.
Valuation
One feature that the two companies have in common is a high P/E ratio. As you'd expect from its stronger share price performance during 2014, Corporate Travel Management has the higher P/E ratio of the two companies at 34.1, although GWA's is hardly low at 20.5. Indeed, both companies trade at much higher P/E ratios than the ASX, which has a comparatively low P/E of 16.2.
Such high relative ratings may put a lot of investors off buying shares in the two companies, however when their respective earnings growth forecasts are taken into account, they generate price to earnings growth (PEG) ratios of just 1.27 (GWA) and 1.01 (Corporate Travel Management). Both are attractive and well below the ASX's PEG ratio of 1.83.
As a result, both GWA and Corporate Travel Management could be worth buying at present prices, since they offer stunning growth prospects at reasonable prices.
