It’s been a tough 12 months for bank shareholders with the share price of each of the big four banks down between 4.8% and 12% since 14 August 2015. The Commonwealth Bank of Australia (ASX: CBA) didn’t help matters much when it reported last week and disclosed anaemic revenue and profit growth along with flat dividends on the prior year. I also don’t expect too much to be different from each of National Australia Bank Ltd. (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) when they report their respective full-year financial results later…
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It’s been a tough 12 months for bank shareholders with the share price of each of the big four banks down between 4.8% and 12% since 14 August 2015.
The Commonwealth Bank of Australia (ASX: CBA) didn’t help matters much when it reported last week and disclosed anaemic revenue and profit growth along with flat dividends on the prior year.
I also don’t expect too much to be different from each of National Australia Bank Ltd. (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) when they report their respective full-year financial results later in 2016.
Given the banks’ size and maturity, revenue growth is hard to find.
However, if you’ve got money to invest today, you should aim to grow your investment meaningfully over time, and to do this, you need to buy into companies that are both reasonably priced and have the potential to grow their revenue, operating cash flow and net profits.
Rather than focus on the big four banks, here are four stock ideas that you can follow up on and which I believe offer reasonable growth prospects in the next 3-5 years:
Sirtex Medical Limited (ASX: SRX)
This medical device company, which manufactures liver cancer treatments using small particle technology, is not without risk. However, shareholders have been amply rewarded over the longer-term due to incredible revenue and earnings growth over the last 10 years.
On 11 July 2016, the company announced that its dose sales of SIR-Spheres Y-90 resin microspheres for the end of the financial year was 16.4%, towards the upper-end of previously-provided guidance of 15-17%.
Here’s hoping for a similar growth in net profit.
With a share price that is still 24% down from its previous high, holding shares in Sirtex would be a good option for those investors who wish to buy exposure to a fast-growing company as a part of a diversified portfolio.
Fantastic Holdings Limited (ASX: FAN)
Despite some restructuring affecting the Le Cornu brand in Adelaide, the company is still expected to report earnings before interest and tax (EBIT) approximately 30% above that of 2014-15 (after one-off non-recurring charges associated with the restructuring).
With profit growth above 30% expected, and with the provision of a fully-franked dividend yield of 4.6%, the company’s shares still look like good value today for this Australian furniture manufacturer and retailer.
Event Hospitality and Entertainment Ltd (ASX: EVT)
The company’s shares have risen 20% in the last 12 months, mainly because of good performances at an operational level for this diversified provider of entertainment, hospitality and tourism/leisure services.
For the first half of the 2015-16 financial year, revenue was up 15.9% with profit and diluted earnings-per-share up almost 50%.
Whilst there’s been no guidance from the company before it reports its annual results later this month, earnings are forecast to be at least 20% higher than that of 2014-15.
With a fully-franked dividend yield of 3.3%, this would be a good stock to own over three to five years as a part of a diversified portfolio.
IPH Ltd (ASX: IPH)
This provider of intellectual property services has been marked down from a high of $9.43 to $6.23 more recently.
The only reason why I think the share price has fallen so far is that the share price had gotten ahead of itself in the first place, and its fall back to where it is today provides an opportunity.
The shares provide a 2.9% partially-franked dividend yield, but with earnings-per-share nevertheless forecast to be 30% higher by 2017-18, today’s price looks enticing.
It’s easy to focus on the big four banks, or any of the other big names in the top 20, but being big or well known doesn’t necessarily translate to good market-beating returns over the long term.
If you can extend your investment horizon beyond the big four banks, and then diligently read up and learn as much as you can about the smaller companies in the ASX universe, you may well find some very suitable portfolio candidates that will treat you very well over time.
Motley Fool contributor Edward Vesely owns shares of Sirtex Medical Limited. 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.