For most Aussie investors, the last three months have been challenging. That's because the ASX has slumped by 6%, with doubts surrounding the Aussie economy, a highly volatile Chinese stock market and troubled Eurozone weighing heavily on the minds of investors. And, looking ahead, the ASX's future appears to be uncertain, with the macro outlook being challenging and the prospect of further pressure on commodity prices.
As such, it may feel as though there is little for investors to shout about. However, there are a number of stocks that look set to provide investors with cheer, with two examples being pharmaceutical company, CSL Limited (ASX: CSL) and diversified financial play, Suncorp Group Ltd (ASX: SUN).
A key reason for this is that both stocks have bright futures when it comes to earnings growth. For example, CSL is forecast to post annualised growth in its bottom line of over 20% during the next two years, while Suncorp's earnings per share are set to rise by 32% per annum during the next two financial years. Clearly, both of these growth rates are well ahead of the wider index and, as such, could act as positive catalysts on their respective share prices.
Of course, Suncorp has been delivering much-improved performance in recent years, with its earnings rising by 48% last year and at an annualised rate of 12.9% during the last five years. This means that the company's dividends are expected to be fully covered by net profit in the current year, with Suncorp's dividend coverage ratio due to rise to around 1.2 times in financial year 2016.
This shows that the current yield of 5.8% is sustainable and, with Suncorp yet to fully deliver on its planned $170m in cost savings and efficiencies that are set to filter through by 2018, it could offer real term growth in shareholder payouts over the medium term.
Meanwhile, CSL's share price may not yet have reached $100, but improving investor sentiment has pushed it over 700% higher in the last ten years. Despite this, it still trades on a price to earnings growth (PEG) ratio of 1.2, which is lower than the ASX's PEG ratio of 1.26. And, with boosts from the acquisition of Novartis' influenza division as well as a weakening Aussie dollar (CSL derives a significant proportion of its sales from outside of Australia) its dividend yield of 1.6% looks set to climb higher, owing to forecast dividend growth of 23% per annum over the next two years.
Clearly, Suncorp's share price performance has disappointed in recent years, with it falling by 29% in the last ten years. However, with a new CEO set to take the reins later this year and an apparent continuation of the strategy that is boosting its bottom line performance, Suncorp's price to earnings (P/E) ratio of 15 has considerable appeal – especially since it is lower than the ASX's P/E ratio of 15.9 and also the wider insurance sector's P/E ratio of 18.4.
