One goal for every portfolio is to have a combination of stocks for stable income and share price appreciation. These two growth stocks could add to your returns and help balance out your portfolio.
Sky Network Television Limited (ASX: SKT), the New Zealand provider of multi-channel, pay TV and free-to-air TV services has maintained its growth in earnings over the past three years with its MySky premium service. It allows viewers to record shows, and is maintaining subscription levels better than its standard digital decoder system.
Over the past three years, net profit grew from $103 million to $137.2 million. In the half-year ending 31 December net profit increased to $82.1 million, up about 22% from $67.4 million. Interim advertising revenue was up while programming costs to revenue went down.
According to the company, its service is in about 48% of New Zealand households. It is developing more services to match changing viewer habits and demands. It started its low-cost IGLOO package to maintain customers who want to scale back from the premium service, yet still want some of the premium channels. Pay-per-view video on demand and sports broadcasts are available with the service.
The average revenue per user (ARPU) in the first half of FY2014 was up from $75.78 to $77.51 on H1 2013, maintaining its upward trend. Full year FY2014 guidance for net profit is $155 million – $160 million.
Oil Search Limited (ASX: OSH) has been in the news recently about its investment in the huge Elk and Antelope gas fields in PNG. It explores for, develops and produces oil and gas in PNG, and has been in the region for decades. It has about a 29% stake in the PNG LNG Project, which is 95% complete, and should have first shipments for export around September this year.
Since 2010, net profit has risen from US$185.6 million to $205.7 million, recovering from reduced profits in 2012. Investors will be looking for strong revenue and earnings growth from the PNG LNG.
The company's full year 2014 guidance is for total production to be 13-16 million barrels of oil equivalent (mmboe), a great increase above the 6.7 mmboe it achieved in 2013. In its first full year, the PNG LNG should add around 21 mmboe to the company's production.
Foolish takeaway
Earnings potential drives up the share price of growth stocks. It sometimes increases PE ratios to ranges possibly higher than investors would like to pay. You need to understand the long-term growth story to see if the premium you pay is justified by steady, probable returns in the future.