MENU

3 high-growth businesses to compound your wealth

Photo: SantiMB.Photos

To take advantage of the power of compounding, there’s nothing quite like a business that is growing its earnings at double-digit rates, year after year.

Owning just a couple of high-quality businesses exhibiting strong ongoing earnings growth can make a big difference to your portfolio, if held for the long term.

If you’re looking for strong earnings growth, here are three companies who are regularly delivering for shareholders.

REA Group Limited (ASX: REA)

REA Group operates residential and commercial property websites, such as realestate.com.au and realcommercial.com.au. It also has interests in many overseas based property websites.

Over the last 10 years, earnings have grown at a rate of 29% per annum, leading to a total shareholder return of 38.9% per annum.

Unfortunately, REA is trading at around 43 times earnings, so it’s hardly a bargain. But it could be worth paying up for, with earnings forecast (by Morningstar) to grow by 19% per annum for the next 2 years.

If the company can replicate its local success across the globe, it could keep growing strongly for many years to come.

Bapcor Ltd (ASX: BAP)

Bapcor (formerly known as Burson Auto Parts) is an automotive parts distributor. The company supplies replacement parts and consumables used for servicing and repairing vehicles, while also owning retail businesses such as Autobarn and servicing centres such as Midas.

Having only been listed for about 4 years, it has a short but impressive history. After an acquisition in 2017, its underlying profit grew by 48% per share, with Bapcor expecting around 30% profit growth for 2018. The company is continuing to grow its store count and expects to have its first five Asian stores open this year.

The total shareholder return over the last 3 years has been 27.4% per annum. Bapcor shares are trading at around 29 times earnings.

CSL Limited (ASX: CSL)

The biotech giant has to be one of the highest quality companies on the ASX.

CSL continues to create and sell products and treatments that are making a difference, for society and for shareholders, and the company doesn’t look to be slowing down anytime soon. In fact, the company’s earnings growth is accelerating.

Over the last 5 years, earnings grew by around 15% per annum, but over the next 2 years, earnings are forecast to grow by 24% per annum.

Shares are currently trading for around 40 times earnings.

Foolish takeaway

As is usually the case, fast-growing companies don’t come cheap. Out of these three shares, I think Bapcor represents the best value at the moment. Buying shares in companies with strong earnings growth, when they’re attractively priced, is one of the best ways for building wealth over the long term.

4 Stocks for Building Wealth After 50

Renowned investor Scott Phillips just released a brand-new report detailing his 4 favourite stocks to buy right now.

And I don't know about you, but I always pay attention when some of the best investors in the world give me a stock tip.

This is your chance to get in at the very beginning of what could prove to be very special investments.

Click here to get started today!

Motley Fool contributor Dave Gow owns shares of Bapcor and REA Group Limited. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia has recommended REA Group 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.