With the Aussie economy going through a rough patch, many investors must be wondering why the ASX is close to a seven-year high. After all, unemployment remains stubbornly high and the outlook for commodities such as iron ore and oil continues to be downbeat. As such, many investors may be dubious about the growth prospects of a number of large-cap ASX stocks.
However, in spite of the difficult economic environment, there are a number of ASX stocks with strong growth prospects. Better still, they also offer good value for money even while the ASX trades close to 6,000 points and, with that in mind, here are three of my favourite growth stocks right now.
Domino's Pizza Enterprises Ltd.
Even though there are concerns regarding the future trajectory of consumer spending, Domino's Pizza Enterprises Ltd (ASX: DMP) continues to have expansion potential both domestically and in Asia. In fact, it is targeting a doubling of its current exposure in Japan, where the company's focus on technology is helping it to differentiate its product from rivals.
This should help Domino's to post earnings growth of 28.3% per annum during the next two years, with spending levels in Australia likely to remain robust even if disposable incomes are squeezed. In fact Domino's has shown in the UK that it has a stable business model which has delivered relatively strong performance even through a recession. As such, it appears to be worthy of a price to sales (P/S) ratio of 5.9.
Ramsay Health Care Limited
Ramsay Health Care Limited's (ASX: RHC) decision to diversify outside of Europe and Australia was vindicated this week when France decided to reduce the tariff it pays to private hospitals by 2.5%. This was larger than expected and shows that while Ramsay is the largest hospital operator in France it still needs to move into fast-growing markets, which it is doing via its exposure to China.
Despite the move by France, Ramsay is forecast to increase its bottom line at an annualised rate of 19.7% during the next two years. This makes its price to earnings (P/E) ratio of 34.4 seem justifiable – especially when you consider that Ramsay has an excellent track record of bottom line growth, with its earnings having risen by 17.2% per annum during the last five years.
Oil Search Limited
Clearly, the outlook for Oil Search Limited (ASX: OSH) is uncertain and largely dependent upon the future oil and gas prices. However, while volatility is likely to be high, Oil Search also offers excellent growth prospects via its relatively low production costs and additional output from the Papua New Guinea liquefied natural gas (LNG) project. In fact, Oil Search's bottom line is expected to rise by 23.8% per annum during the next two years.
In addition, Oil Search has a relatively robust balance sheet and, should the oil price rise, could exit a challenging period in a stronger position relative to its higher cost and less financially flexible peers. As a result, its price to book (P/B) ratio of 1.8 seems to be a fair price to pay.
