For most people enjoying a relaxing retirement means beginning the saving process early in their working career so that there is a big enough nest egg to fund a comfortable retirement with a standard of living akin to their working years.
For equity investors, once they reach the retirement phase of life their focus is likely to be on generating an income from their assets. This can be achieved not only through dividends but also through a slow and steady sell-down of their portfolio. In the accumulation phase however, maximising the growth potential of their assets is of much greater importance.
The following three companies offer a good mix of quality but also (importantly) decent long-term growth prospects which could make them good candidates for investors building their nest eggs.
Ardent Leisure Group (ASX: AAD) operates leisure and entertainment venues across Australia, New Zealand and the USA. Ardent's assets include bowling centres, health clubs and theme parks. According to analyst consensus data supplied by Morningstar, Ardent is forecast to grow earnings per share (EPS) by 6.4% and 6.3% in financial years (FY) 2014 and 2015. The strategic nature of its assets – the theme parks particularly – provide a degree of defensiveness to Ardent's earnings. The growth profile of the entertainment industry is a positive too. While the S&P/ASX Small Ordinaries Index (Index: ^AXSO) (ASX: XSO) is trading on a forecast price-to-earnings (PE) multiple of 16, Ardent is trading on a FY 2015 PE ratio of 17.5. Given the quality and growth potential, now could be a reasonable time to purchase this above average company.
Diversified financial services company IOOF Holdings Limited (ASX: IFL) has a market capitalisation of nearly $2 billion, making it far from a minnow player in the finance industry, but still small enough that there is plenty of potential for IOOF to grow larger. Analyst consensus has IOOF growing EPS by 12.6% in FY 2014 and 11.2% in FY 2015. Based on the FY 2015 forecast, IOOF is trading on a PE of 14.6; in comparison the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is trading on a forward PE of 14.8. Given IOOF's prior success in making value accretive bolt-on acquisitions and the tailwind of compulsory superannuation, IOOF could also make a sound addition to a long-term portfolio.
Iress Ltd (ASX: IRE) provides critical software and services to a number of financial organisations both in Australia and increasingly to countries overseas. Iress is forecast to grow its earnings by 49.3% (unadjusted) and 10.7% over the next two financial years. If the company meets these forecasts then the stock is trading on a prospective FY 2015 PE of 17.4. With a semi-monopoly in the provision of certain critical services, Iress is not only deserving of a premium rating but it also has a solid outlook for growth as well.
