In today's tumultuous markets, it's important to have stocks in your portfolio which move against typical business cycle trends. Here are two companies that you might consider if you're looking for a less risky bet.
IDP Education Ltd (ASX: IEL)
IDP Education is an organisation that offers student placements and internships across Australia, New Zealand, the United Kingdom, the United States and Canada.
IDP's fee-based revenue model works by charging the institutions that students are placed at. This diversifies income streams by geography, meaning demand for studies in one country does not directly correlate with the other countries.
The other half of its revenue base comes from its part-ownership of IELTS, the English language test. This segment grew by 18% over the first HY, ensuring the diversity of income streams such that factors like politics don't obliterate its earning potential.
Though IDP's debt reaches almost 41% of equity, its EBIT is 113x its net interest payments. Similarly, its operating cash flow to debt ratio is 130%. This should give investors comfort.
IDP grew its EBITDA by 33% to $66.8 million in the first half of 2019, with revenue also up 26% over the same period. The company had been operating for over 50 years before floating on the ASX four years ago. Since then, the IDP share price has quadrupled, rocketing 85% in the year-to-date alone.
ResMed Inc (ASX: RMD)
ResMed is arguably one of the best options for those looking to buy shares in a healthcare company on the ASX.
It sells continuous positive airway pressure (CPAP) devices to treat sleep apnea, holding a dominant position in this space worldwide. More recently, ResMed has been actively expanding its cloud-connected digital health space. While it aims to capitalise on the rich data of connected healthcare, this subscription-based business model allows for better margins.
Furthermore, the global total addressable market is huge. At least a billion people suffer from sleep apnea and are yet to be diagnosed. This puts ResMed at a huge advantage to benefit from this trend.
In the third quarter of the FY, ResMed's operating profit jumped 15% while year-on-year revenue grew 12%. Since announcing these strong quarterly results on May 2, the ResMed share price has shot up 17%.
Though it may seem rather expensive with its 56x P/E ratio, it shows investors are confident in ResMed's future earnings potential.
