Earnings season is nearly over and there have been a number of hard hits to some share prices.
However, there have been a few companies that are investing for long-term growth and the current earnings are suffering a little for this long-term vision.
Most investors would agree that investing in shares for the long-term is a good thing to do and gives the best chance of success. So, when a business does the same thing then that should be a good thing too, right?
The market is very unforgiving and wants success now and in the future. Some commentators argue that this is a curse for companies, particularly for American businesses that report every quarter and are expected to increase profit every time.
The same thing can be seen on the ASX with some mid-caps that are aiming for long-term growth.
Greencross Limited (ASX: GXL) is rapidly expanding its network of in-store vets inside Petbarns, which should be a good boost for earnings in the medium-term because it saves on costs and allows for cross-selling to customers. The market was displeased with how little Greencross managed to grow its underlying earnings per share, even after considering all of the investing that Greencross is doing for the future.
Healthscope Ltd (ASX: HSO) is constructing and expanding numerous hospitals to add more beds and operating theatres. I think this is a good strategy because of the clear ageing demographics which could boost the number of hospital visits. However, the market has heavily punished Healthscope for not growing earnings this year, even if the future looks rosy.
Seek Limited (ASX: SEK) and Crown Resorts Ltd (ASX: CWN) are both investing to take advantage of the huge Chinese economy but are struggling to grow the bottom line at the moment. Both companies are a decent way below their all-time highs from a couple of years ago.
Foolish takeaway
As small retail investors, we have the opportunity to invest for the long-term when the market punishes companies for not coming up with short-term success. By ignoring short-term problems we can pick an appealing price to invest in companies that are on our watch lists and ultimately benefit from the market's short-term expectations.
