A company’s core EPS is surely a key indicator of its cash-generation and further utilization for reinvesting for growth or paying returns to shareholders. For better future, the companies might just invest in projects or making capital allocation for pipeline purposes when looking particularly at growth. For stocks that are linked to good growth projections, return on investment is like a steady phenomenon over years, however, investing in an early-stage startup which may emerge as a good growth Stock later sometimes proves to be a great strategy. A stock with growing potential and reducing costs will have expanding margins to yield better bottom line levels. Further, many investors also vouch for stocks that can provide a good source of income, and dividends at the same time, while cash payouts indicate future growth opportunities.
One such example is that of Aristocrat Leisure Limited (ASX: ALL), considered to be an ASX growth stock with an EPS of 0.788 AUD which is a fair enough EPS for a company of this Large-Cap size, at a market capitalization of about $20 Billion. The strong 32% profit improvement over the six months to 31 March 2018 demonstrates the sound strategy used by the company. A dividend of 19 cents was declared by the company while ALL’s dividend yield is just 1.27%. An entry into the $50 billion market of gaming has been said to help the gambling company design poker machines in a better manner. With the acquisition of social casino company, Aristocrat entered the digital space in 2012. There have been two major acquisitions that include Social casino operator, Big Fish games; and Israeli game house, Plarium. This year to date, the stock jumped 31 percent to a 12 month high and currently trades at $30.410 with a P/E multiple of 39.110. This is on a higher side at the moment, while we do look for better entry opportunities.
Another so called growthstock as emerged in the past two years is the a2 Milk Company Limited (ASX:A2M) under the consumer staple category, which has risen stupendously over 1841.5% since inception and we could also book some gains (though at an early level in view of many regulatory risks hovering over the stock some time back). A2M still trades at a pretty high level despite falling about 16% in last three months. The stock has an EPS of $ 0.192 and a market capitalization of about 8 billion. The group is known to have multi-site, multi-product and geographic diversification, while having associations with Synlait Milk Limited and Fonterra Group Limited. China revenue and EBITDA have more than trebled lately. CFDA infant formula registration was also seen to be achieved by Synlait Milk for a2MC infant formula. The company is building a global branded dairy nutritionals business and accelerating new product development. Further strategic partnerships, expanding into SE Asia and other market penetration opportunities have been prioritized. Increasing investment in brand, IP and know-how to ensure leadership in an emerging A1 protein free category with portfolio strengthening are other highlights.
While the above stocks have been at the forefront of growth for quite some time, the trading levels are high and they look a bit expensive at current prices.
