The two stocks below had really strong results in this month's reporting season, but how far will that carry them and their share prices into the next year? Both have attractive business growth plans and it will come down to execution. I am bullish on one, yet the other has brought up some bearish sentiment.
SEEK Limited (ASX: SEK)
The operator of seek.com.au, Australia's number one job search website, hit another home run with its FY 2014 full year underlying net profit up 27% to $179.7 million on top of another double-digit rise in revenue. Since 2009, both earnings and revenue have tripled and its stock has gone from about $6 to $17, or an average 23% annual gain for five years.
Is it reasonably priced at 33 times earnings though? Analyst consensus forecasts are for earnings to rise about a compound 21% annually for the next two years. Its PEG ratio would be about 1.6 if that projection is correct. The great amount of overseas investment and acquisitions is where the high growth should be coming from. While still in its expansion phase, the premium you pay for growth is worth it. The business model is good and the stock story is improving, so there's no reason to jump ship on this one.
Crown Resorts Ltd (ASX: CWN)
I wrote previously about the integrated resorts operator possibly being in correction territory just before it reported its full year results. My big concern is that it has so many casino development projects in its pipeline over the next six years. Growth is good for any company, but these projects can be over $1 billion or several billion each.
Despite that, its full year normalised net profit was up a whopping 35.2% to $640 million. That was mostly thanks to Crown's share of its joint venture business, Melco Crown, which saw normalised net profit shoot up 91.2%. The Macau casino business is driving those earnings. After its new Manila casino opens and operates a while, we will be able to gauge better what to expect from other casinos outside of major gambling locations. The Australian casinos are still affected by weak consumer sentiment at home. I think investors should wait a little longer on picking up Crown Resorts' stock because lower share prices may open up better opportunities.
