Why these 3 companies are generating huge growth

Credit: Franciso Diez

Shares of growth dynamo oOh!Media Ltd (ASX: OML) have been on a tear lately and even hit a new record high on Friday last week.

The shares hit a high of $5.35 before ending the session at $5.20. Despite that minor dip, investors still have plenty of reasons to be happy with how their investment is performing, with the shares up a remarkable 106% in the last 12 months, compared to a decline of nearly 5% for the ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) benchmark.

oOh!Media is a leader in Australia’s out-of-home media market. It owns and manages a portfolio of display advertising panels and billboards around the country (as well as in New Zealand), which provide advertisers with the ability to reach a wide audience in unmissable locations.

For instance, many of its billboards are located above or next to major roads, while many of its panels are located in shopping centres as well as cafes and airports, which typically have high dwelling times.

Meanwhile, the company is converting many of its advertising panels and billboards from static to digital. This should enable higher margins for the business, over time, and allow for time-of-day advertising. It will also open up the advertising spaces to new customers which need a quick turnaround.

An example of this is a car dealer or a supermarket which are advertising a two or three-day sale. Digital panels will allow for these advertisements to be rolled out much sooner than would be possible with a static panel.

Unlike other corners of the media and advertising market, including TV and newspapers, this segment has demonstrated very strong growth in recent years, and oOh!Media has certainly benefited. The company smashed its own prospectus forecasts in financial year 2015 (FY15) and has predicted strong growth to occur again in FY16.

Of course, this does introduce competition risk with other businesses such as APN Outdoor Group Ltd (ASX: APO) and QMS Media Ltd (ASX: QMS) also pushing to increase their own market share. As such, there is the risk that demand between these businesses could increase market rents of various sites and thus, impact their margins over time.

There is also a risk that, in the event of an economic downturn, the advertising market could also suffer. Given much of oOh!Media’s operating costs are fixed in nature, a downturn could certainly impact profitability in the short-to-medium terms.

These are certainly factors that investors should bear in mind before committing to an investment in oOh!Media (or APN Outdoor Group or QMS Media, for that matter). For now, however, it could be well worth adding all three to your long-term watchlist.

Three more stocks for your watchlist

The Motley Fool's renowned dividend investing guru recently revealed his newest dividend buy recommendation and short list of 3 Best Dividend Buys Now. Which means if you're reading this message right now, you're not on the list to uncover their names before they potentially go gangbusters. Simply click here to learn more about these shares.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.