These three stocks had good earnings growth recently, but I believe they have significantly more to come over the short and mid-term. The elements are there for growth, and they have definite plans to take advantage of them.
Fortescue Metals Group Limited (ASX: FMG), along with the other iron ore miners like BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), has profited well from the higher iron ore spot prices, and with the expansion program to raise production to 150 million tonnes per annum, the company is paying down its borrowings at a surprisingly high rate.
Production was about 30 million tonnes in Q2 2014, so annualised that would be about 120 million tonnes, but the company stated that it should reach its 155mtpa rate goal in FY2014. Another great plus is that its C1 production cost has dropped from about US$50 per wet metric tonne to about US$33/wmt since Q2 2013. Higher volumes and a lower cost base can translate into higher earnings and the ability to keep on paying down its debt to reduce interest payments.
REA Group Limited (ASX: REA), the owner of realestate.com.au, has once again increased its profits at a double-digit rate in its half-year ending December 2013, raising underlying net profit by 37% to $70.7 million.
The company has developed improved income streams from services outside of real estate agency subscription revenue, and is expanding its model internationally. The housing market is picking up, so more houses, both established and newly constructed, should be hitting the listings, and with realestate.com.au the number one online real estate listings portal, it should benefit proportionately from that trend.
Flight Centre Travel Group Ltd (ASX: FLT)
The successful rejuvenation of its "bricks-and-clicks" shop front and online sales platform is paying dividends, and more expansion in the higher profit margin corporate travel market, through its FCm business domestically and in the US, is creating the next springboard for growth.
A weakening Aussie dollar might concern some investors about purchasing power of overseas flights and holidays, but the company stated that travellers usually keep buying travel packages, and then adjust their spending budget at the destination, which keeps sales buoyant for the company.
Also, approximately 40% of its revenue comes from overseas, mostly in the UK and US markets, so should the Aussie dollar weaken against the US$ and British pound, earnings from those segments will get a boost from the currency conversion.
Foolish takeaway
If you are unfamiliar with a company, even one that you may know the name of commonly, first of all find out how it makes money. Then get a feel for its sales volumes and prices, and how they can fluctuate if its market changes.
