It's been a hugely positive year for investors in Independence Group NL (ASX: IGO) and Evolution FPO (ASX: EVN), with shares in the two mining stocks rising by 49% and 20% respectively since the turn of the year. Both of them have easily beaten the ASX's performance over the same time period, with it being up a lowly 5% in comparison. However, there could be much more to come from both of them. Here's why.
Upbeat results
Recent results for Independence and Evolution showed that both companies are making encouraging progress. For instance, Independence increased its top line by 77% and EPS by a whopping 154% as it posted a highly encouraging set of full-year results. In addition, Evolution announced a profit of $50 million after a loss in the previous period, with gold production increasing by 9%, bang in-line with guidance.
Future potential
Although impressive, there could be much more to come over the next couple of years from both companies. Indeed, Evolution is expected to increase earnings per share (EPS) from $0.08 in the last year to $0.124 in the current year, which if met would represent a growth rate of 55%. Furthermore, Independence is also expected to deliver strong growth in profits over the same time period, with its EPS all set to grow from $0.27 last year to $0.468 in the current year. If on target this would equate to a gain of 73%.
A major surprise
Despite such high potential earnings growth rates, both stocks trade on hugely attractive P/E ratios. For example, Independence has a P/E of 15.2, while Evolution's is even lower at just 8.4. Both are well below the ASX's P/E of 16, but it's only when they are combined with the two companies' growth rates that their potential really shines though.
For example, the price to earnings growth (PEG) ratio of the ASX currently stands at 1.78. However, Independence has a PEG of just 0.47, while Evolution's is almost as attractive at 0.52. The ratios indicate upside potential for both companies, despite their strong gains made thus far in 2014.
