There were some very strong performances from some S&P/ASX 200 Index (ASX: XJO) shares during May 2023. It's worth asking whether these businesses will be able to keep performing.
Past performance is not necessarily a reliable indicator of future performance, particularly when it comes to cyclical businesses or industries. Businesses that are demonstrating good operational growth year after year may be able to achieve ongoing good returns for shareholders as long as the valuation doesn't become too stretched.
Let's have a look at some of those performers and what could happen next.
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Adbri Ltd (ASX: ABC)
The Adbri share price jumped 36% in May, as we can see on the chart below.
In the construction material ASX 200 share's annual general meeting (AGM), it said that it's seeing strong demand for Adbri's products across key segments. Management noted that as a result of the combination of "market forces and management initiatives", underlying net profit after tax (NPAT) for the period ending April 2023 is "significantly above January 2022 to April 2022".
It said that demand from the mining sector for cement and lime "continues to be strong and is anticipated to remain strong" for the rest of the year. Commercial and infrastructure sectors continue to see strong demand. In the short-term, residential works underpin good order books, though the outlook for the residential sector remains "somewhat patchy".
It was good to hear that the business is doing well, but the outlook for construction seems uncertain over the next year or two. I think the May rise could be a one-off re-rating because the market was underestimating how the business is performing.
I don't think the share price is going to get back to $3 over the next 12 months.
Lynas Rare Earths Ltd (ASX: LYC)
The Lynas share price climbed 17% last month, which we can see on the chart below.
Lynas seemed to benefit from the Malaysian government granting the business permission to keep importing and processing at its Malaysian facility until 2024.
There was uncertainty hanging over the business, but that has now lifted. The ASX 200 share is still a lot lower than it was earlier this year, but any future sizeable gains could be dependent on improvements in the commodity prices for Lynas.
I don't know which way resource prices are headed in the shorter term, so I wouldn't make the bet on what's going to happen next.
Xero Limited (ASX: XRO)
The Xero share price went up 18% in May, as demonstrated on the chart below.
Xero released its FY23 result which demonstrated a lot of growth, including 14% subscriber growth, 28% operating revenue growth and $100 million growth in free cash flow.
I think this ASX 200 share will continue growing its subscriber base, the average revenue per user (ARPU) and profitability, particularly because the business is looking to reduce its operating expense to operating revenue ratio.
As the company demonstrates its profitability, I believe the Xero share price can continue to climb unless there's a widespread market decline.
Megaport Ltd (ASX: MP1)
The Megaport share price went up by 21% in May, as we can see on the chart below.
The ASX 200 share has continued its good run following its strong profit update at the end of April 2023 as investors take stock of how it's performing.
Revenue continues to grow at the business, and profitability is better than expected. In FY24, it could make normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of between $41 million to $46 million, up from $16 million to $18 million in FY23.
I think the company could continue to impress the market with its improving financials, so I think it will keep rising over the medium term, but it could face some volatility in the short term.
