The saying 'don't judge a book by its cover' is as true in the investing world as it is in the real world. That's because, while a company's products, history or sector may not appear to be hugely exciting, its future could be.
For instance, a company may produce a humdrum product, operate across the developed world and have delivered modest growth in the last few years. However, this does not mean that its future will not be exciting for its investors, nor that its earnings growth rate will not increase substantially.
With that in mind, here are three stocks that, on the surface, may appear to be rather average. However, their capital gain potential highlights them as anything but humdrum stocks.
Coca-Cola Amatil Ltd
While the sale of soft drinks is hardly the most exciting of endeavours, Coca-Cola Amatil Ltd (ASX: CCL) is at the start of a major turnaround plan that is exciting for its investors. For example, it is cutting costs, improving efficiencies and, after a five-year period that has seen its earnings fall by 4% per annum, is now expected to return to growth.
In fact, Coca-Cola Amatil is forecast to see its bottom line rise at an annualised rate of 5.4% over the next two years, and this could stimulate investor sentiment – especially with it set to expand into faster growing markets across Asia, too. And, with it having a price to sales (P/S) ratio of 1.46, Coca-Cola still offers good value for money while the ASX has a P/S ratio of 1.58.
Ramsay Health Care Limited
Ramsay Health Care Limited's (ASX: RHC) international exposure is often overlooked by investors, but its presence in Europe and China is hugely exciting for its shareholders. That's because, while the Eurozone is still in the midst of a challenging period, with the potential for a Greek exit (as well as a British exit), its economy is starting to show signs of life. Similarly, Ramsay's joint venture in China, although small, opens the door to what could prove to be the largest health care market in the world.
And, while Ramsay is not cheap at the moment, as evidenced by a price to book (P/B) ratio of 7.1, its price to earnings growth (PEG) ratio of 1.53 indicates that it offers growth at a reasonable price.
Cochlear Limited
Although the sale of medical devices may seem to be more 'tortoise' than 'hare', the future prospects for Cochlear Limited (ASX: COH) make it a exciting growth play. In fact, while many of its sector peers in the health care and equipment sector are set to see their bottom lines grow at a modest pace, Cochlear is in the midst of a superb turnaround.
For example, after ten years of annualised growth of 4.8%, Cochlear is expected to increase its earnings by 39% per annum in each of the next two years. And, while it has a price to earnings (P/E) ratio of over 30, such a strong growth rate indicates that its share price could continue the rise that has delivered capital gains of 38% in the last year.
