If you are looking for stocks that will put the pedal to the floor and burn rubber on the growth highway over the next five years, then probably your best bet is to own top growers doing that now.
The great thing is that to own companies that could double in as little as five years, you'd be surprised to know all you need is a stock that could grow its earnings by only 15% consistently each year over that time to do it. That doesn't even include any dividend payment.
Stock prices generally rise based on their earnings and the price multiple that traders are willing to pay for a stock. If a company is earning $1.00 a share and its price/earnings ratio is usually about 15, then you'd expect it to be selling at about $15 a share.
If the multiple stays the same, you only need to double the earnings per share and the share price regularly would double itself. Compounded growth over time can meet your goal with a smaller percentage rise.
Here are three stocks that I have on my radar as top stocks that are currently growing earnings above 15%, so even if they slow down just a little over time, they still could possibly beat that 15% growth mark.
1) G8 Education Ltd (ASX: GEM)
This childcare centre operator is moving swiftly with regular acquisitions of numerous centre groups at a time. Earnings are up significantly and analyst forecasts have it growing earnings per share quite strongly over the next two years. It's a fragmented market with many private owner operators, so I would look for sustained expansion in the company's centre numbers. It has a 3.4% dividend yield.
2) REA Group Limited (ASX: REA)
The operator of the top website for property searches is growing earnings on the back of a recovering housing market. However, it has such a commanding market position of the online real estate search market, it can charge premium fees for its services. Earnings per share were up about 25% in FY 2013 and it is continuing on that trend. Its yield is 1.1%.
3) Ramsay Health Care Limited (ASX: RHC)
As a private hospital owner and operator, you might not imagine it would be a high growth stock, but that hasn't slowed it down yet. It has been on a steady acquisition path of hospitals and medical centres in Australia, Europe and Asia. Some analyst forecasts have the company growing earnings around an average 19% over the next two years. It offers a 1.7% yield.
