Some of the most exciting prospects on the ASX are smaller companies that have recently listed onto the stock exchange.
I think businesses that operate in a stable industry and offer a lot of potential growth are some of the best candidates to invest in, particularly ones that may follow in the footsteps of businesses that have already been successful.
Greencross Limited (ASX: GXL) and InvoCare Limited (ASX: IVC) have both been solid choices since they listed and are now clear leaders in their respective sectors. Two young pretenders that could be worthy investments today are as follows:
Propel Funeral Partners Ltd (ASX: PFP)
Propel was only listed on the ASX a couple of weeks ago but I think it has a good future. It is already the second largest funeral operator in Australia but has plans to grow a lot into the future.
It's starting with 80 locations and some of its acquired brands have been operating for more than a century. It has a strong regional presence, whereas InvoCare is focused more in Australia's capital cities. It seems that both can thrive without heavily competing in each other's areas.
I think Propel's current and future earnings prospects are strong. Its current revenue is very defensive, sadly a number of people die every year and this gives Propel regular earnings.
I believe Propel's future growth is compelling because the Australian Bureau of Statistics has made projections that the number of deaths in Australia will increase by 1.4% per annum between 2016 and 2025.
Propel's prospectus stated that on an issue price of $2.70 per share it was trading at 25.5x FY18's net profit after tax. It's quite a bit more expensive now, but I think it offers a lot of potential over the next decade.
National Veterinary Care Ltd (ASX: NVL)
National Vet Care is a veterinary clinic operator that is acquiring more clinics to grow further. Since 30 June 2017 the business has grown its total number of clinics by 13.2% through adding seven clinics.
The number of pets is increasing steadily in Australia. Since 2013 the number of cats and dogs has grown by 7% and 3% respectively.
National Vet Care has a good source of regular revenue. In Australia, 79% of dogs and 65% of cats go to the vet each year.
It's currently trading at 31x FY17's earnings with a grossed-up dividend yield of 1.64%.
Foolish takeaway
If National Vet Care and Propel can follow in the footsteps of their larger competitors then shareholders could be in line for strong returns over the coming years. At the current prices I think National Vet Care is probably trading at better value because it's likely to grow quicker over the next few years.
