If you're an individual investor the number one rule is to stuff your portfolio full of fast-growing companies with competitive advantages that mean they are likely to succeed long into the future. However, overpaying for fast-growing companies is one of the commonest mistakes investors make, avoid jumping in at the top of the market and you set yourself up for consistently good performance.
Here are a few growth companies to consider that I think are at attractive valuations relative to their outlook. Be patient and if they come down in price due to an all-round market sell off be ready to act.
Credit analytics provider Veda Group Ltd (ASX: VED) is a great looking business with competitive advantages, a proven track record and strong outlook. Veda provides services such as credit reports on individuals or businesses to clients across the private and public sectors. The group's big advantage is that revenues tend to be sticky and recurring with opportunities to win more clients and develop more sophisticated products in the future.
Selling for $2.00 Veda trades on 22.8 times 2015's projected earnings with a dividend yield of 1%, based on the group's forecast payout of two cents per share for the year to June 30, 2014. Under $1.90 it looks a buy.
New Zealand-based online marketplace Trade Me Group Ltd (ASX: TME), is another business with formidable competitive advantages by virtue of its sheer dominance in the New Zealand marketplace. This online classifieds and eBay-style business looks to have several tailwinds and a natural place in the digital future. The $3.28 selling price also looks attractive trading on around 15 times 2015's projected earnings with a handy 3.4% dividend yield.
Office and property manager Servcorp Limited (ASX: SRV) is a founder-led business that has been growing revenues, profits and dividends at prodigious rates. This company has a big worldwide growth runway and with a driven family management team to run the business it looks likely to succeed.
Servcorp trades on a price-earnings around 21 assuming it can earn 24 cents per share in FY 2014, although it may beat that assumption. The company is forecasting a payout of 18 cents per share for the full year placing it on 3.6% yield when selling for $4.99. Fund manager Perpetual Limited (ASX: PPT) likes the look of Servcorp too, recently increasing its holding in the business.
