Is there any value to be found in Cochlear Limited, Domino’s Pizza Enterprises Ltd., and Surfstitch Group Ltd?

Would you believe that the S&P/ASX 200 (INDEXASX: XJO) is down just 1.47% in the past 12 months?

Crazy, right?  That’s despite a nearly 20% fall from grace earlier this year, and a rise of 5.5% in the past few days.

As ever, a few companies drastically outperform the market, although not all of them are a buy at today’s prices:

Cochlear Limited (ASX: COH) – last traded at $94.43, up 36% for the year

Hearing aid developer Cochlear might look expensive with a Price to Earnings (P/E) ratio of 37 and a measly 2.2% dividend, however, the company is substantially higher quality than some other similarly priced stocks.

Despite a $5 billion market cap and seemingly ‘high’ price (caused in part by a limited number of shares on issue), Cochlear estimates that its market penetration of the total global hearing market is less than 5%.

With enormous potential to expand its reach and a relatively small portion of earnings coming from the Asia-Pacific region, Cochlear Limited still looks like a bargain.

Domino’s Pizza Enterprises Ltd. (ASX: DMP) – last traded at $49.07, up 96% for the year

Back when Domino’s traded at $40 a share, I felt that the company had room to move higher as a weaker Australian dollar, store growth and expansion in Europe delivered performance to shareholders.

The subsequent announcement of the Pizza Sprint acquisition in France (adding 89 stores for a total of 330) helped, as did Domino’s upwards revision of its target store count in Europe from 1,350 to 1,500.

After another profit upgrade, with underlying Net Profit After Tax forecast to be 25% higher this year, shares headed closer to $50. Domino’s goes from strength to strength, although I believe that at today’s prices there is a greater than average chance of the share price taking a hit

Surfstitch Group Ltd (ASX: SRF) – last traded at $2.06, up 106% for the year

Surfstitch Group, a recent Initial Public Offering (IPO), will be something of the envy of many retailers, with gross profit margins of 45% and cracking double-digit revenue growth in all regions. Better, the company posted a profit before tax of $4.1m and has outlined plans for ample growth in future periods.

A recently announced acquisition of Garage Entertainment, an action sports content generator that produces content for Sky Network Television Ltd (ASX: SKT) among others, is sure to attract increased investor interest.

I’m generally bearish on retailers like Surfstitch because I believe they use ‘smoke and mirrors’, i.e., a brand, to successfully charge higher prices compared to equivalent non-brand goods. Bias aside, Surfstitch’s recent report is impressive and I expect it will go on to reach new heights in the near future.

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Motley Fool contributor Sean O'Neill 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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