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2 shares I’d buy before earnings season

Earnings season is just around the corner, although some companies are already owning up to disappointing trading updates.

Almost every asset in the world is trading at near all-time highs, including the Australian share market. That makes it quite hard to find good value at the moment, but I think the following two shares could be good buys today before they report:

Bapcor Ltd (ASX: BAP)

Bapcor is Australia’s largest auto parts business in Australia. It has made a number of acquisitions in recent years, such as Hellaby’s in New Zealand, which have boosted its size. Management have effectively integrated these businesses and boosted margins.

In-fact, management believe that the synergy benefits of Hellaby’s could amount to between $8 million to $11 million in earnings before interest and tax (EBIT) over the next three financial years. This beats Bapcor’s original estimates in the business case.

Bapcor is growing its number of stores impressively and expects to achieve 30% growth of net profit after tax (NPAT) from its continuing operations.

It’s currently trading at 24x FY17’s earnings with a grossed-up dividend yield of 3.29%.

Ramsay Health Care Limited (ASX: RHC)

Ramsay is one of the world’s largest private hospital operators and is growing its number of hospital beds every year.

The Ramsay share price has dropped by around 17% since its all-time high over a year ago. However, Ramsay has kept growing its earnings per share (EPS), which makes the business more attractively valued.

Management expect that core EPS will grow by 8% to 10% in FY18 and I expect the EPS will grow nicely for many more years to come because of the ageing populations where it operates.

Ramsay is currently trading at 26x FY17’s earnings with a grossed-up dividend yield of 2.84%.

Foolish takeaway

I think both shares are excellent businesses with very effective management. Over the next year I think Bapcor will easily beat the market, but Ramsay could be one of the best ultra-long-term investments on the ASX.

These top shares could also be great options to buy before reporting season as well.

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Motley Fool contributor Tristan Harrison owns shares of Bapcor and Ramsay Health Care Limited. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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.

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