I have a number of stock screens and filters I use to track ASX-listed companies I believe are high quality and worthy of adding to my portfolios.
One screen looks at companies that have strong earnings per share growth histories, high returns on equity (ROE), low levels of debt and a relatively cheap share price. The following twelve companies are currently the top ranked stocks.
Here's a summary.
| Company | Share Price | Market Cap ($m) | 5-yr EPS growth | ROE |
| TPG Telecom Ltd (ASX: TPM) | $7.47 | $6,338.1 | 35.0% | 27.6% |
| Blackmores Limited (ASX: BKL) | $112.88 | $1,944.4 | 28.7% | 63.8% |
| Sirtex Medical Limited (ASX: SRX) | $28.98 | $1,671.8 | 35.2% | 31.7% |
| REA Group Limited (ASX: REA) | $50.70 | $6,677.9 | 29.3% | 39.8% |
| SEEK Limited (ASX: SEK) | $15.31 | $5,323.2 | 28.6% | 22.0% |
| Carsales.Com Ltd (ASX: CAR) | $11.70 | $2,821.7 | 12.8% | 46.6% |
| JB Hi-Fi Limited (ASX: JBH) | $29.37 | $3,358.8 | 8.5% | 40.7% |
| Flight Centre Travel Group Ltd (ASX: FLT) | $34.47 | $3,480.0 | 11.8% | 18.7% |
| Magellan Financial Group Ltd (ASX: MFG) | $21.77 | $3,520.4 | 99.0% | 60.2% |
| CSL Limited (ASX: CSL) | $102.50 | $46,731.8 | 15.7% | 46.8% |
| ResMed Inc. (CHESS) (ASX: RMD) | $8.36 | $11,759.0 | 11.6% | 21.5% |
| Commonwealth Bank of Australia (ASX: CBA) | $74.43 | $128,264.8 | 6.0% | 16.3% |
| Platinum Asset Management Limited (ASX: PTM) | $4.97 | $2,915.8 | 5.4% | 56.0% |
Source: S&P Global Markets Intelligence
The share price fall for TPG Telecom of more than 36% in just over a month is why TPG is back at the top of my list, but it seems unlikely that the telco can continue generating earnings per share growth of 35% for the next five years like it has in the past.
Blackmores has also risen to the top primarily due to its share price almost halving since it hit $220.90 at the start of this year.
Sirtex and REA Group have seen their share prices fall 30% and 23% respectively from their 52-week highs, while Seek and Carsales.com have fallen 11% and 15% respectively from their highs.
For most of the companies in the list, it seems investors have given up on them achieving their consistently strong earnings growth in recent years, and maintaining very high returns on their capital. That may be so, but high quality companies tend to continue outperforming and generating high rates of earnings growth and their share prices follow.
My guess is that a portfolio comprised of the above 12 stocks will handily outperform the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the next 5 to 10 years.
