Westpac Banking Corp, Sonic Healthcare Limited, DuluxGroup Limited: Is it time to own these stocks?

When stocks make a move upwards after a period of trading sideways, they can attract a lot of investor attention, but is there any buying opportunity left?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When stocks start making a move upward after a period of trading sideways, they can attract a lot of attention from investors. Is this the chance to ride it up further? You need to know what is driving the stock and if the share price has gotten ahead of expected growth. Investors can rush in and sometimes bid a stock up too quickly when they see an opportunity.

These three stocks have performed relatively well over the past year, but how much more do they have to offer?

Westpac Banking Corp (ASX: WBC) does offer a very attractive 4.7% yield fully franked, yet analysts forecast earnings and dividend growth to be in mid-single digits for the next several years. It is trading at a slight price/earnings discount to Commonwealth Bank of Australia (ASX: CBA), which is understandable since CBA is expected to grow earnings more. Over the past five years, CBA's earnings per share growth rate was about 9% compared to Westpac's 6%, so I think CBA would be a better pick.

Pathology and medical diagnostic service market leader Sonic Healthcare Limited (ASX: SHL) had a flat half-year result due to acquisition costs as well as investments in several of its labs in multiple countries. In financial year 2014, the healthcare provider achieved a solid 13% earnings increase. Financial year 2015 may be just in the low-single digits, yet the following years could see stronger growth from benefits of the acquisition and investments. Currently, Sonic Healthcare is trading at too much of a premium, so I would hold off until the share price settles down.

DuluxGroup Limited (ASX: DLX), the producer of paints, sealants and home improvement and gardening supplies, is benefiting from the housing boom and lower interest rates. Consumers buy brands such as Dulux and British Paints, Selleys and Yates to spruce up homes before listing for sale and property buyers improve homes after purchases. Interest rates are expected to fall even further, so that could boost DuluxGroup more in the near future. Analysts are forecasting solid earnings growth over the next few years, but it seems the market has already priced that in, so the stock is no bargain. Starting a small position may be alright just to have it in your portfolio, but wait for better entry prices before adding to it.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.  We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policyThis article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »