Amcor Limited
With the ASX trading on a price to earnings (P/E) ratio of 16.5, it is hardly cheap at the present time. However, Amcor Limited (ASX: AMC) trades at a significant premium to the wider index, with it having a P/E ratio of 18.8. As such, many investors may be somewhat put off investing in the packaging company for fear of a derating over the medium term.
However, Amcor's share price could beat that of the ASX moving forward. That's because it has superb long term growth prospects, with its push into faster growing markets having the potential to boost its bottom line. And, with Amcor having an impressive track record of bottom line growth (its earnings have increased at an annualised rate of 8.4% during the last 10 years), it seems to be worthy of a substantial premium to the ASX.
Telstra Corporation Ltd
Although Telstra Corporation Ltd (ASX: TLS) is sometimes viewed as a rather dull stock by many investors, that isn't necessarily a bad thing. After all, a Foolish portfolio should include a variety of companies so as to provide diversification and, with a beta of just 0.5, Telstra offers investors a less volatile share price experience than does the wider index.
In addition, Telstra also has bright growth prospects as it seeks to reposition the business so that it is less reliant upon the domestic market for its sales. This could deliver higher growth rates moving forward and change Telstra's perception among investors, thereby leading to a higher share price over the medium term. While it has a P/E ratio of 18.2, Telstra appears to be worthy of a premium to the ASX.
Newcrest Mining Limited
On the face of it, a mining company with a P/E ratio of 25.2 seems to be unappealing. After all, the sector is enduring a challenging period. However, Newcrest Mining Limited (ASX: NCM) is somewhat different to your typical mining company. That's because its profitability is set to increase, with it being forecast to rise at an annualised rate of 9.9% over the next two years.
And, with its cash flow per share increasing by 46.5% last year, its financial position appears to be improving at a time when many of its mining peers are seeing theirs deteriorate. As such, it seems to be deserving of a premium to the ASX and could deliver excellent capital gains for its shareholders.
