The term “disruptive technology” is a popular term these days. It’s understandable that investors are seeking out “disruptors” when you look back at some of the companies which have excelled thanks to disrupting the status quo over the past decade.
Consider REA Group Limited (ASX: REA) and Carsales.Com Ltd (ASX: CAR). These two companies have been at the forefront of the move to digital classified advertising, which has left old-world newspaper classifieds high and dry.
Many investors have missed out on the exceptional gains these two companies have produced. In the past five years alone, REA’s share price has soared 322%, while Carsales.Com’s share price has gained 98%. In comparison, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up just 24%.
While the largest gains from these two sector leading stocks may now be in the past, there could be two appealing opportunities still ahead for savvy investors, namely iProperty Group Ltd (ASX: IPP) and iCar Asia Ltd (ASX: ICQ).
iProperty’s share price has gained 918% in the past five years, although it has declined nearly 30% in the last 12 months. Meanwhile, iCar Asia’s share price has jumped 425% in the last five years and likewise is down around 21% in the past year.
Despite the share price movements of these two stocks, iProperty and iCar Asia are still small, early stage businesses and potentially they both have growth opportunities ahead of them. With growing operations throughout the Asian regions both companies are looking to replicate the success that REA and Carsales.Com have enjoyed in the Australian market.
Given the size of the Asian markets they operate in, this prize is exceptionally valuable. For many investors it is mainly a question of pricing. According to data supplied by Morningstar, iProperty is expected to earn 3.8 cents per share in financial year (FY) 2016, implying a price-to-earnings (PE) ratio of 73.7x. Morningstar doesn’t provide a forecast for iCar Asia, however, it’s reasonable to assume the company will still be loss making in FY 2016.
Of course, for many investors REA and Carsales.Com never looked cheap yet their valuations managed to grow into their share prices. The same could be true for these two start ups as well.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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