For many reasons, it is easy to think that we’ve ‘missed the boat’ when the share price of strong growth companies has skyrocketed. We tend to anchor to the price at which we first looked at (and decided not to buy) a company’s shares. While it is true that strong growth often attracts competitors, which can reduce margins or market share, there are some businesses with moats that are sufficiently strong to maintain high levels of growth over a long period of time. Here are 3 companies that have reported high rates of growth over the last few years, and…
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For many reasons, it is easy to think that we’ve ‘missed the boat’ when the share price of strong growth companies has skyrocketed. We tend to anchor to the price at which we first looked at (and decided not to buy) a company’s shares.
While it is true that strong growth often attracts competitors, which can reduce margins or market share, there are some businesses with moats that are sufficiently strong to maintain high levels of growth over a long period of time.
Here are 3 companies that have reported high rates of growth over the last few years, and that I believe may still have a lot of growth left.
Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)
Fisher & Paykel design, manufacture and market medical device products and systems for use in respiratory care, acute care and the treatment of obstructive sleep apnoea. The company provides products for hospitals which include adult and infant respiratory and surgical equipment. The company also provides sleep apnoea equipment for the home.
Fisher & Paykel has multiplied net profits by more than 5 times since 2008 when it reported a net profit of 30.5 million, or 5.8 cents per share. It last reported earnings per share of 30.2 cents in 2017. Analysts have forecast 20% growth in earnings per share for 2018 and 2019. With increasing awareness and diagnosis of issues such as sleep apnoea, the company potentially has a long runway for growth. However, anticipated growth may already be priced in as shares currently trade at 40 times earnings.
Altium Limited (ASX: ALU)
Altium provides PC-based electronics design software for engineers who design printed circuit boards. Printed circuit boards support and connect the electronic components of a product and are the foundation of most electronic products today.
The company started reporting consistent positive earnings per share in 2012 when it reported earnings of 7 cents per share. Last year, Altium reported earnings of 30.8 cents per share – an increase of over 4 times 2012 earnings. Analysts have forecast earnings of 39 cents per share in 2018, 48 cents per share in 2019, and 58 cents per share in 2020. However, shares currently trade at 66 times last year’s earnings, and 35 times forecast 2020 earnings.
Corporate Travel Management Ltd (ASX: CTD)
Corporate Travel Management provides travel management solutions to the corporate market. Apart from corporate travel, the company offers travel management for sport, event, resource, and leisure travel.
Since 2010, Corporate Travel Management have increased earnings per share over 11 times, from 4.7 cents in 2010 to 54 cents in 2017. Analysts have forecast earnings per share of 81 cents in 2018, 95 cents in 2019, and 108 cents in 2020. As with Fisher & Paykel and Altium, growth has been factored into the share price already. Shares currently trade on a price to earnings of almost 37.
Fisher & Paykel Healthcare, Altium and Corporate Travel Management have a strong history of growth as well as strong forecasted growth. However, there is a price at which it is no longer sensible to buy into a business, despite its growth. It seems to me that the growth has been factored into the current price. If you think that the companies can beat forecasts, than I’d buy today. Otherwise, it may pay to sit on the sideline for just a little longer.
Alternatively, these shares may be even better investments in 2018.
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Motley Fool contributor Stewart Vella has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia owns shares of Altium. 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 Scott Phillips.