It might be hard to believe in the current environment, but there are a number of high quality stocks that have performed exceptionally well over the past 12 months.
Although it is a dangerous strategy to chase the best performing stocks over the past 12 months and hope they can repeat the same performance, investors should always be looking at why these companies have performed so well and determine whether or not this is sustainable.
Below are two stocks that have produced massive share price gains for their shareholders over the past 12 months and the reasons behind this.
Corporate Travel Management Ltd (ASX: CTD)
Corporate Travel has been a top performing stock over a long period of time and over the last 12 months, the share price has increased by nearly 40%.
The company focuses on corporate and business travel management solutions that are cost effective and convenient for its customers.
Corporate Travel has a long history of delivery strong earnings growth and its most recent result was no exception. Revenues and underlying earnings increased by 79% and 76% respectively in FY15, and this was driven by strong growth in all of the markets it operates in. Pleasingly for Corporate Travel, over half of this growth came organically with the remainder being generated through a number of acquisitions undertaken throughout the year.
The growth outlook for Corporate Travel remains positive with the company likely to embark on further acquisitions over the next year. The company holds no debt and has a strong balance sheet which puts it in a strong position to further expand its global operations. Without taking into account any new acquisitions, management is forecasting FY16 growth in underlying EBITDA to be in the range of 25%-30%.
Although the shares are trading at over 33x FY15 earnings, I still believe Corporate Travel will remain a strong performer over the next couple of years as the strong growth in earnings continues. With that in mind however, I would like to see the share price under $10 before I would be comfortable in taking a stake in the company.
Burson Group Limited (ASX: BAP)
Burson has only been listed for just over 12 months but has already secured its place as one of the best performing IPOs since its debut with its share price increasing by more than 70%. Just last week it was promoted into the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) to confirm just how well the stock has performed.
The company is Australia's leading automotive aftermarket parts business and is a supplier to thousands of independent mechanics and repair shops across the country. It also operates 130 retail stores and through its recent acquisition of Metcash, Automotive Holdings is now the owner of some of the most well known brands including Autobarn, Autopro and Midas.
Burson's FY15 result was a record for the company that saw revenues and earnings grow by 10% and 19% respectively. The company is also expected to deliver another record result in FY16 with guidance of earnings per share growth in the mid teens.
Burson operates in a fairly defensive sector as people will often need to repair their cars no matter what the economic environment. Coupled with the competitive advantages it possesses through its large network and purchasing power, Burson is one of my preferred investments in the automotive sector.
Investors do need to be mindful though, the shares are trading at a significant premium to the broader market and are unlikely to deliver the same returns over the next 12 months. Despite this, I am confident that Burson will be a good long-term investment if purchased at the right price.
Corporate Travel and Burson were once much smaller companies before exploding into the superstars they are today. Luckily for you, The Motley Fool has found two small caps that are just about to take the next step!
