During the course of the last year, packaging company, Amcor Limited (ASX: AMC), and hospital operator, Ramsay Health Care Limited (ASX: RHC), have smashed the ASX. In fact, while the ASX is up less than 2%, Amcor has soared by 37% and Ramsay is up by 38%. Clearly, all investors would agree that, with the benefit of hindsight, they should have been purchased 12 months ago.
However, investing is easy with hindsight. And, for individuals who are keen to generate a great return in the future, the past holds no real usefulness except, maybe, to learn from mistakes. Looking ahead, is it too late to buy such strong performers? Or, could Amcor and Ramsay continue to outpace the ASX in future months and years?
Clearly, both stocks are set to benefit from a loosening of Australian monetary policy. That's because it is likely to mean a further depreciation in the Aussie dollar and, with a significant proportion of their revenue being generated abroad, both stocks could gain a real boost over the short to medium term.
Furthermore, their growth potential outside the domestic economy remains significant, with Amcor having exposure to a number of fast-growing markets across the developing world, for example, And, with the recent acquisition of Souza Cruz's internal tobacco packaging operations in Brazil increasing its exposure to South America, it appears to be well positioned to post strong growth numbers despite its bottom line being forecast to rise by just 3.2% in the current financial year.
Meanwhile, Ramsay's new joint venture in China may be small at the present time but the fact that it now has exposure to what could prove to be the major health care market in the world is a major plus for its investors. And, as a major player in the private hospital sector in Europe, it stands to benefit from an improving outlook for the Eurozone – especially if Greek bailout talks progress and the quantitative easing that has been undertaken by the ECB begin improve consumer and investor confidence in the single-currency region.
Despite rising by such a large amount in the last year, Amcor's shares trade at a discount to the wider sector. For example, while Amcor has a price to sales (P/S) ratio of 1.56, the wider materials sector has a P/S ratio of 2.35.
And, while Ramsay has a higher price to earnings growth (PEG) ratio than the wider health care equipment and services sector (1.62 versus 1.02), Ramsay's track record of growth indicates that it is relatively reliable and worthy of a premium. For example, it has increased net profit by over 20% per annum during the last 10 years and, as such, a PEG ratio of 1.62 seems to be a fair price to pay for such consistent growth performance.
So, while Amcor and Ramsay should have been purchased a year ago prior to their strong share price performance, it seems relatively likely that the same will be said in a year's time. As such, they appear to be well-worth buying right now.
