With all the talk in recent months being about potential problems, it is somewhat rare to find a company that is talking about little else other than expansion and growth potential. After all, with commodity prices falling, regulatory changes making banks hold more capital and a supermarket price war being a possibility, many of the ASX's major sectors are enduring very tough periods. Add to that the challenges faced by income-seeking investors who are seeing the value of their cash eroded by inflation in many cases and the present time is rather gloomy for Aussie investors.
However, amid all the negativity, there are stocks that are set to deliver impressive financial performance over the long term. And, as is often the case, they have not developed an irresistible new product or reinvented themselves. Instead, they have simply provided a better quality product or service than their rivals and delivered added value to their customers.
For example, Domino's Pizza Enterprises Ltd. (ASX: DMP) has simply given its customers exactly what they want. It has provided consistent, relatively high quality pizzas that are easy to order and which are more often than not delivered (hot) within a set time period. And, with it having a bigger presence on social media and a more youthful, fun marketing campaign, it is easy to see why the brand is popular among younger consumers. Furthermore, while achieving this sounds simple and easy for a new entrant or competitor to replicate, in practice it is difficult and this strengthens Domino's position further.
Looking ahead, Domino's is likely to extend its dominance into other fast food categories. For example, it now offers a much wider range of food than a handful of years ago, with a move into fried chicken and doughnuts two examples of Domino's offering more breadth and seeking to cross sell new food items to existing pizza customers. And, with its bottom line set to rise by almost two thirds in the next two years, investor sentiment in the stock could be positively catalysed and push its price to earnings growth (PEG) ratio above its current level of 2.
Similarly, Ramsay Health Care Limited (ASX: RHC) also has a relatively simple offering. It is a private hospital operator and has grown to become the largest of its kind in Australia. Furthermore, it has expanded into Europe and, more recently, into China. As such, it offers the scope to post excellent growth numbers by simply putting in place the same, successful business model in a variety of regions across the globe, with its success being based on strong organisation, cost control and a focus on customer service, rather than a particularly unique offering.
Looking ahead, Ramsay is one of the most appealing growth stocks on the ASX, with its earnings set to rise by almost 20% in each of the next two years. And, with a lack of similarly strong growth prospects from a number of sectors, including oil and gas, mining, banking and retail, investors could pile into Ramsay and other impressive growth stocks, thereby pushing their ratings ever higher. As a result, Ramsay's present price to book (P/B) ratio of 7.9 may not prove to be excessive in the long run.
