It’s been an early Christmas gift for shareholders in the following three companies, who are enjoying strong price rises on top of a cracking performance for the year.
While great for those shareholders, the question of whether these companies represent value at today’s prices is a tricky one, since ‘past performance is no indication of future performance.’
Here’s my take on the future facing these three stocks in 2016:
eCargo Holdings Ltd (ASX: ECG) – last traded at $0.44, up 109% for the year
Shares in eCargo, an online marketplace and logistics supply chain operator, soared recently after the group announced a deal with Woolworths Limited (ASX: WOW) to develop the latter’s online presence on Tmall, China’s largest online marketplace. Shares in eCargo hit a high of $0.54, before closing yesterday at $0.44.
Valuing the company is quite difficult as eCargo didn’t announce any specifics – such as anticipated revenue – from the deal, and the company only earned $23 million Hong Kong Dollars (approximately A$4 million) in receipts from customers at its most recent quarterly cashflow report. eCargo is certainly worth a closer look, but is only for more risk-tolerant investors at this stage.
Domino’s Pizza Enterprises Ltd. (ASX: DMP) – last traded at $57.43, up 135% for the year
Domino’s Pizza hit a high of $59 earlier this week as investors buy into the stock on the back of its recent acquisitions in France and Germany. With a continuing emphasis on technology as well as product innovation, Domino’s has been able to successfully use its size to reinvent itself, to the detriment of competitors.
I expect Domino’s to continue to perform well in the future, but as the company grows it will get progressively more difficult to ‘move the dial’ on earnings. As growth slows, I believe the company will no longer command as much of a price premium.
For this reason I believe investors are better off buying during dips, although I suspect Domino’s share price could well head higher in 2016.
Hansen Technologies Limited (ASX: HSN) – last traded at $3.35, up 100% for the year
Software business Hansen Technologies has tripled its value in the past two years as investors caught sight of its growth outlook and responded to soaring revenues and expanding margins. Just last week management announced that revenues would be between $72-$74m for the half year ending December 2015, while margins would come in at the top end of its previous guidance of 25%-30%.
Revenue in the first half of last year was just $49m and, although this half’s results are boosted by acquisitions there’s clearly plenty for investors to get excited about. So although Hansen might look expensive on a trailing Price to Earnings (P/E) ratio of 33, I suspect the company isn’t particularly overpriced. Shares could well move higher in 2016.
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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 owns shares of Hansen Technologies. 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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