Stock pickers look for value everywhere. Most times you have to pay up for a company's earnings growth because it's no secret it is doing well. Its popularity can raise the premium even further.
When you find a stock that has a price-earnings ratio less than the level of its expected annual growth rate percentage, the stock could be in bargain territory.
Below are some companies that have this balance of pricing and forward earnings growth. Why? In many cases, the market has been distracted and is chasing other hot stocks instead. These stocks could be buying opportunities now.
Iress Ltd (ASX: IRE)
This company is the developer and service provider of financial planning and wealth management systems such as XPLAN. The company benefits when investors using its platform increase share trading. More superannuation funds are expected to flow into the share markets. Company earnings have been forecast by analyst consensus to possibly rise about 28% annually for the next two years. Compared to a 24 price-earnings, that's reasonable for the price.
Super Retail Group Ltd (ASX: SUL)
The specialty retailer operates such stores as Supercheap Auto, BCF and Rebel Sports. Up until last year, the company had a strong investor following, but that faded before Christmas when sales started to soften. Almost nine months on and retail trade hasn't completely recovered. The company could still see earnings rising due to at least 27 new stores across all of its divisions being opened in FY 2015. Its PE is 15 and consensus forecasts are for 13% earnings growth annually for the next two years. Add in the healthy 4.5% fully franked dividend yield and that matches up well with the PE.
Woodside Petroleum Limited (ASX: WPL)
The energy giant is looking for LNG development sites in several regions overseas to fill up its production pipeline, which some investors consider on the light side with no immediate new development starting up. Still, the conservatively managed company doesn't want to take a lot of chances. With a PE of 14, it is at the lower end of its past PE range. One or several acquisitions could put a fire under this stock. Analysts forecast a possible rise in earnings of about 18% each year for the next two years. Together with the big 5.6% yield fully franked, the scale is definitely shifting towards attractive growth versus price.
Having a good combination of dividend income and earnings growth is what makes a winning portfolio. I think IRESS has the most immediate gain to look forward to of these three since the stock market is currently rising and in full swing.
In addition, there is another stock that you will want to know about. Our top analyst, Scott Phillips, recently identified one cheap but growing ASX stock with a 6.7% grossed-up dividend yield which could be a standout buy.
The Motley Fool has written a free report "The Motley Fool's Top Dividend Stock for 2014-2015" which it's sharing with all interested investors.
If this is you, simply click on the link here and enter your email address – it takes less than 30 seconds – and we'll send it to you, completely FREE!
