It's hard to predict where stock prices will go to even for good companies. In the short term, many things can move a stock, especially its popularity.
Over time though, the earnings growth and financial strength are what counts for winning stocks. Investors should understand what a company is trying to do and then watch its performance. That shows you the development over the long term.
The three quality stocks below are all ready to go higher in my opinion, but are they good buys right now?
ResMed Inc. (CHESS) (ASX: RMD)
The breathing aid and respiratory device maker is very close to setting a new 52-week high after it announced higher quarterly revenue last week. The stock gained 17% since late April and currently it pays a 2.0% yield unfranked.
New product releases like its AirSense 10 platform for sleep-breathing disorders and a life support ventilator called Astral have helped raise quarterly revenue 6%. Consensus forecasts for earnings growth are an average 12% annually over the next two years. I think the current $5.85 price is fair for the kind of growth it offers. Having a number of new products in several categories can really drive revenues and earnings, so watch ResMed closely.
DuluxGroup Limited (ASX: DLX)
The producer of paints, home improvement and garden care goods fell in share price with the general market recently, from about $5.80 to $5.30. It has benefited from the rising housing market, which has a knock-on effect on its products as property owners do remodelling and home maintenance.
The growth catalyst is still in place due to low interest rates. The stock has a 3.6% yield fully franked and is reasonably priced at 18x earnings for its growth.
Santos Ltd (ASX: STO)
The energy producer is getting its first revenue boost from the PNG LNG project exports, which started in May. Also, its GLNG project is nearing completion and first LNG shipments are planned for 2015. Already, interim sales revenue was up 25%. Management raised the interim dividend and plans to review dividend payments again around the time of the GLNG start-up.
This should be good for dividend income investors. Once an LNG project starts, it can generate good revenues for many years and help fund future production expansion for further gains. The current 21 price-earnings ratio is lower compared to recent years. Starting just a small position now and watching the developments unfold is probably best.
