If you were well informed during the recent ASX reporting season, you would have noticed a common principle shared by many of the companies that saw double-digit share price gains on market open:
A significant portion of company earnings and future growth were aimed internationally.
Standout performers included A2 Milk Company Ltd (ASX: A2M) and Nearmap Ltd (ASX: NEA). These companies recognise the significant international market which can and should be taken advantage of. Their business models revolve around creating a product or service which gives the company a form of competitive advantage, allowing them to charge a premium within its value chain.
Another standout performer was Treasury Wine Estates Ltd (ASX: TWE) which operates using a similar business model.
What makes Treasury Wines a standout performer?
Treasury Wines has underlying strength through its Penfold branding of wines which has stood the test of time and is often seen as Treasury Wine's trump card in turbulent markets. Especially in China, where the direct translation of Penfold in Mandarin, pronounced as "Bern Fu", means "generate wealth" – this provides a level of goodwill which can be indefinitely valued as superstitions run strong in the country. This can be directly indicative of Treasury Wine's recent report of a 31% EBIT growth in Asia, significantly outperforming its other key market, the US.
The February 14 results announcement for Treasury Wines was nothing short of impressive. With NPAT up 17%, EPS up 19% and a dividend up 20%, the Treasury share price received a solid 9% boost upon market open and closed around 3% higher for the day. These results are significant as it shows that Treasury Wines is a company which continues to expand its business under market pressures given the talks of the US-China trade war, interest rate hikes and danger of fraudulent products in China.
Treasury Wines looks to be well positioned for future growth supported by its healthy financial statements. Currently, it trades on 28x earnings which may appear expensive but when factoring in the growth that the company is achieving, it's the equivalent of paying less than a dollar for a dollar of company earnings. Sounds like a good deal to me.
Foolish takeaway
With a powerful business model and a strong name, Treasury Wine Estates will continue to charge a premium for its products which appears to be widely accepted by consumers. Based on its financial statements, Treasury Wines is well positioned for future growth and I would rate it as a strong buy for any investor looking for a growth company to add to their portfolio.
Treasury Wine Estates has carved a path for strong future growth which can be reflected by its finances and public reports. It won't be long before shareholders are celebrating over a glass of red.
For growth investors looking for something a little different, this little known ASX company could be uniquely positioned to profit from a $22 billion boom industry in 2019.
