With the Aussie economy going through a challenging period, many investors may be struggling to find stocks that offer strong growth prospects. Certainly, the long term future of the economy looks reasonable – especially after China looks set to commence a stimulus package and the RBA cut interest rates to just 2.25%.
However, both of these measures contain a time lag and, in the meantime, it's difficult to find stocks that offer strong growth.
With this in mind, here are 3 ASX stocks that are due to post excellent earnings growth over the next couple of years. The question, though, is whether you should buy them right now?
Domino's Pizza Enterprises Ltd.
Over the next two years, Domino's Pizza Enterprises Ltd. (ASX: DMP) is forecast to increase its bottom line at an annualised rate of 28.4%. While impressive, it's not particularly surprising, since Domino's has posted annualised growth in earnings of 20.1% during the last five years, as it has increased its share of the lucrative fast food market.
Interestingly, Domino's also offers relatively stable share price performance. For example, it has a beta of just 0.82, which means that its share price should move by just 0.82% for every 1% change in the ASX. And, with a price to earnings growth (PEG) ratio of 1.97, it offers better value than the ASX, which has a PEG ratio of 2.38.
Newcrest Mining Limited
In the current year, Newcrest Mining Limited's (ASX: NCM) bottom line is expected to grow by only 2%, but next year is set to be a whole different story. That's because the gold miner is forecast to grow earnings by 18.3% in financial year 2016 and this could act as a catalyst – especially while Newcrest trades on a price to book (P/B) ratio of just 1.38.
Of course, Newcrest's net asset value has fallen heavily in the last year, as lower commodity prices have hurt the company's financial standing. However, despite this fall of 23.7% in one year, Newcrest has still managed to grow the value of its net assets at an annualised rate of 13.6% in the last ten years. And, with cash flow per share having increased by 7.3% per annum during the same time period, Newcrest's long-term future remains sound.
CSL Limited
Over the last five years, CSL Limited (ASX: CSL) has been able to increase its net profit at an annualised rate of 10.8%. While impressive, it is set to achieve almost double this rate of growth during the next two years, with annualised growth of 20.2% forecast for 2015 and 2016.
Of course, investors are being asked to pay a high price for such a strong growth rate, with CSL's shares currently trading on a price to earnings (P/E) ratio of 25.8, which is relatively high given that the ASX has a P/E ratio of 16.6. However, when you consider the growth potential (and track record) of CSL, its PEG ratio of 1.28 has huge appeal, while its improving cash flow (which has risen by 13.5% per annum during the last ten years) provides evidence that it remains a financially sound business.
