Since the turn of the year, the ASX has been a massive disappointment. the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has fallen by 6% and left many investors nursing losses.
Of course, the outlook for the Aussie economy is a clear indication of why investor sentiment has been so poor. Australia could enter a prolonged recession and, bluntly, it would not be a major surprise since a slowdown in Chinese growth has left commodity stocks cutting back on investment, which has been a major drag on overall economic performance.
However, some stocks have handsomely outperformed the index this year and have delivered very impressive capital gains for their investors. For example, gold mining company Newcrest Mining Limited (ASX: NCM) has posted a share price rise of 11.5% since the turn of the year, which is impressive given that the price of gold hit a five-year low this year.
Newcrest has become a leaner, more efficient and lower cost business, making fundamental changes to its operations in recent years so as to cope with the disappointing performance of the gold price. And, with its earnings due to rise from $0.61 per share in the current financial year to as much as $0.77 in the next financial year, it appears as though the market is beginning to price in improved performance.
Certainly, Newcrest may trade on a price to earnings (P/E) ratio of 18.9 versus 15.1 for the ASX. But, such strong growth is difficult to come by at the present time, which means that a further upward rerating could be on the cards over the medium term.
Similarly, JB Hi-Fi Limited (ASX: JBH) has posted capital gains of 18% since the turn of the year which, given the outlook for consumer confidence, is perhaps somewhat surprising. Certainly, the company’s annualised sales growth of 16.8% during the last ten years may not be repeated moving forward but, with a focus on efficiencies, productivity and engagement with customers, JB Hi-Fi is forecast to increase its earnings by over 5% per annum during the next two years.
While this rate of growth may not be astounding, given the outlook for the Aussie economy it would be relatively impressive. Furthermore, and despite its recent share price gains, a P/E ratio of 13.4 is 14% lower than the wider retailing sector’s P/E ratio of 15.6, which indicates that a further share price rise is very achievable.
Meanwhile, Super Retail Group Ltd (ASX: SUL) has also beaten the ASX so far in 2015, with its shares rising by almost 25% since the turn of the year. This comes after a very disappointing 2014 when Super Retail’s share price declined by 45% and, as the company’s recent results showed, it continues to make encouraging progress with its restructuring of smaller businesses within the retail group.
Although the investment and cost of such changes led to a fall in net profit in the most recent financial year, the restructuring of Ray’s Outdoors and the integration of Workout World within Rebel should mean increased profit growth over the medium to long-term. And, with Super Retail having a price to sales (P/S) ratio of just 0.79 versus 1.33 for the ASX, it still seems to offer good value for money despite its stunning share price gains year-to-date.
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Motley Fool contributor Peter Stephens has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks 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 policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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