The Bull

Monday 24

November, 201412:06 AM

Industry Chart

TheBull PREMIUM

  • Trading
  • &
  • Technical
  • Analysis

6 Stocks - Top Performers, But Are They Priced For Perfection?

6 Stocks - Top Performers, But Are They Priced For Perfection?

By Anthony Black 24.06.2013


Stocks priced to perfection leave little room for error during market corrections. The market is quick to cut down companies on excessive price/earnings multiples at a hint of disappointing news on the horizon. Companies with strong underlying businesses aren’t exempt from having their price premiums rapidly stripped.

But top stocks do justify a premium to a point. But as James Samson, of Lincoln Indicators, says that doesn’t mean investors should pay any price to get their hands on them. “Premiums vary in justification, and as businesses quickly become market darlings and post significant share price gains, the risk of a fall can build,” Samson says. “Whether you implement a growth or value stock picking strategy, investors should consider industry peers, use a watch list and ensure the premium isn’t unreasonable. Then be opportunistic. In this market, volatility creates plenty of opportunities for the patient investor.”

Samson and Bell Potter Securities private client adviser Charles Thomas examine six stocks they believe can be part of any balanced portfolio at the right price. The companies widely appeal as they are proven performers with strong businesses.

Carsales.com (CRZ)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

Samson says share price gains of this digital vehicle classifieds business have far surpassed the broader market in recent years. “There’s no doubt the low cost online model is a huge advantage and, as an industry leader, it should be afforded a price reflective of that quality,” he says. “However, when the market looked weak and mining money sought a new home, CRZ hit dizzying heights, trading on a forward price/earnings ratio of 31 times. After a reality check, the business once again looks more attractive, but on current forward P/E multiples of 21 times on June 19, it’s still trading well above its peers and the broader market. Investors need to remind themselves that everything has a fair price, even quality.”

iiNet (IIN)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

Samson says the share price rose on healthy expectations for the mid-cap telecommunications sector. Traditionally trading at a price/earnings discount to industry peers, iiNet is now commanding a healthy premium due to growth expectations. He says the share price fell by 20 per cent between May 15 and June 7 in response to the market over-estimating the value of earnings. iiNet is a quality business with a strong market position and increasingly attractive scale. “However, investors must be disciplined and pay a price they deem as representing value,” he says.

Domino’s Pizza Enterprises (DMP)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

The share price has more than doubled since February 2010. “DMP is not only a leader in the food services market, but also in the use of digital services to enhance its base offering,” Samson says. “There’s no doubt in my view that the company is among the best on the ASX. However, on a forward price/earnings multiple above 20 times on June 19, investors might think twice.”

REA Group (REA)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

A premier online advertiser of real estate classifieds in Australia, Samson says the stock has provided investors with an astounding 700 per cent plus return since 2008. The stock still appears to be priced at the top of its range. But, he says, with double-digit earnings per share growth expected in the next two years, REA undoubtedly commands a premium to its peers and the broader market. Samson says the share price fell about 20 per cent between May 15 and June 7. “We expect this stock to continue growing, so any retreat in price may signify an opportunity,” he says.

Commonwealth Bank (CBA)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

Charles Thomas says Bell Potter has buy ratings on Commonwealth Bank and Challenger despite recent share price weakness. He says CBA’s share price retreated from $73.45 on April 30 to $65.12 on June 12. CBA reported 8.5 per cent higher unaudited cash net profit after tax to $1.9 billion in the third quarter of 2013, underpinned by strong performances in Australian banking. “While the bank continues to manage asset growth profitably without jeopardising net interest margins (higher in third quarter of 2013) and credit quality, we anticipate sufficient revenue momentum on the back of improving housing affordability and loan approvals,” Thomas says. The shares were trading at $68.38 on June 19.

Challenger (CGF)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

The share price retreated from $4.20 on April 30 to $3.69 on June 12. On June 19, the shares were trading at $3.95.  Thomas says: “Challenger is in a strong position to reformat its dividend payout ratio, with a growing life book, burgeoning funds management business and a range of new products gaining traction – both pending and launched. In addition, we believe dividend franking may arrive sooner than the current guidance of fiscal year 2015.”

Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.



FROM THE NEWSLETTER

Rise of corporate divorces leads to fleeting gains

For the global mergers and acquisitions market,... More

How do you give financial help to your adult children?

Most, who can, want to give financial help to... More

Eight Pitfalls in Evaluating Green Energy Solutions

Oil that was cheap to extract (say $20 barrel)... More

Stocks on a roll: ASX rolling 52-week highs

ASX rolling 52-week highs for the previous... More



WHAT’S ON THIS WEEK

week 28 November 2014
    • 24
    • BHP BHP Billiton briefing on its coal and copper businesses | 8:49 AM
    • Deloitte/Financial Services Council lunch David Murray, chair of the Financial System Inquiry, speaking at a Deloitte/Financial Services Council lunch | 8:50 AM
    • 25
    • AllianceBernstein economist Guy Bruten Briefing on Australian economy in 2015 by AllianceBernstein economist Guy Bruten | 4:23 AM
    • AOFM Australian Office of Financial Management (AOFM) to issue $200 million of February 21, 2022 Treasury Indexed Bonds | 4:25 AM
    • Australian British Chamber of Commerce lunch Helen Conway, director of Workplace Gender Equality Agency, speaking at Australian British Chamber of Commerce lunch | 5:42 AM
    • CEDA CEDA workplace flexibility event featuring PwC managing partner Gavin Moss | 6:46 AM
    • RBA Speech by Reserve Bank of Australia deputy governor Philip Lowe to the annual Australian Business Economists conference dinner | 8:48 AM
    • HVN Harvey Norman annual general meeting | 8:48 AM
    • MPL Medibank Private shares to begin trading on ASX | 8:48 AM
    • ALL Aristocrat Leisure full year results | 8:49 AM
    • ANZ ANZ-Roy Morgan weekly consumer confidence survey | 8:49 AM
    • BKN Brickworks annual general meeting | 8:50 AM
    • MSB Mesoblast annual general meeting | 8:51 AM
    • RFG Retail Food Group annual general meeting | 8:51 AM
    • 26
    • AOFM AOFM to issue $700 million of April 21, 2024 Treasury Bonds | 2:19 AM
    • ABS Australian Bureau of Statistics construction work done for September quarter | 4:25 AM
    • HIA Housing Industry Association/Commonwealth Bank affordability report for the September quarter | 4:27 AM
    • CAB Cabcharge annual general meeting | 5:22 AM
    • WEB Webjet annual general meeting | 5:22 AM
    • SUN Suncorp chief executive Patrick Snowball speaking at Australian British Chamber of Commerce lunch | 5:22 AM
    • AVG Australian Vintage annual general meeting | 6:08 AM
    • REX Regional Express annual general meeting | 6:09 AM
    • 27
    • AOFM AOFM to issue $500 million of Treasury Notes maturing on Febrary 27,2015 | 4:05 AM
    • ABS ABS private new capital expenditure and expected expenditure for the September quarter | 4:24 AM
    • HIA HIA new home sales for October | 4:27 AM
    • WOW Woolworths annual general meeting | 4:28 AM
    • CBA Commonwealth Bank business sales indicator for October | 4:28 AM
    • BOQ Bank of Queensland annual general meeting | 5:20 AM
    • SEK SEEK annual general meeting | 5:21 AM
    • MYX Mayne Pharma Group annual general meeting | 5:23 AM
    • BPT Beach Energy annual general meeting | 5:23 AM
    • FeTech magnetite and iron ore conference FeTech magnetite and iron ore conference | 5:41 AM
    • 28
    • RBA RBA to release financial aggregates for October | 4:26 AM
    • LYC Lynas Corp annual general meeting | 4:27 AM
    • MEL Metgasco annual general meeting | 4:28 AM
    • PRY Primary Health Care annual general meeting | 4:28 AM
    • RRL Regis Resources annual general meeting | 4:29 AM
    • AHF Australian Dairy Farms annual general meeting | 6:07 AM
    • AOFM AOFM to issue $500 million of October 21, 2019 Treasury Bonds | 6:09 AM
    • FeTech magnetite and iron ore conference FeTech magnetite and iron ore conference | 6:09 AM

TheBull.com.au

TheBull.com.au

TheBull PREMIUM article search

STOCK QUOTE

Don't know the company code? Click here



Featured Comment

Low wages growth, rising unemployment and shaky consumer confidence suggest property-price growth, already slowing, will decline in 2015. Lower house prices would weigh on dwelling investment and consumption.

Cheap property stock to watch

Broker buys

  • ASX Code
  • Company
  • Broker
  • TPMTPG TelecomCalibre
  • VEDVeda GroupCalibre
  • LLCLend LeaseAlpha Securities
  • MQGMacquarieAlpha Securities
  • OSHOil SearchPhillipCapital
  • CWNCrown ResortsPhillipCapital

Broker sells

  • ASX Code
  • Company
  • Broker
  • MINMineral ResourcesCalibre
  • AGOAtlas IronCalibre
  • MYRMyerAlpha Securities
  • CCLCoca-Cola AmatilAlpha Securities
  • QANQantasPhillipCapital
  • MINMineral ResourcesPhillipCapital

Central Banks Rates

  • RBA2.50%
  • FED0.25%
  • BOE0.50%
  • BOC1.00%
  • RBNZ3.25%
  • ECB0.15%
  • SNB0.00%
  • BOJ0.10%

Upcoming dividends

  • ASX Code
  • Company, Div., Franking
  • Ex-Div.

Eight brokers like these stocks

  • ASX Code
  • Company Name
  • Consensus Target
  • DOWDowner EDI Limited$5.78
  • FMGFortescue Metals Grp Ltd$6.89
  • ORAOrora Limited$1.51
  • RIORio Tinto Limited$81.22
  • CSLCSL Limited$73.30

Upcoming Floats

  • ASX Code
  • Company Name
  • Float Date

PLEASE SUPPORT OUR SPONSORS, AUSTRALIA'S LEADING BROKERS:



© Copyright The Compare Group Pty Ltd. All rights reserved.