While investors should never invest in a stock just because it is exciting, changes made to a company's product offering, business model and regional exposure can be exciting and profitable, too. In fact, it usually takes some kind of step-change in the performance of a company for it to warrant an improvement in investor sentiment, with changes to how a business operates often being a clear catalyst for improved financial performance.
One company that is undergoing a rapid transitional period is Telstra Corporation Ltd (ASX: TLS). It remains a dominant player in the Aussie mobile market and, while in the past it has been viewed as a quasi-utility by a number of investors, in the future it could prove to be a superb growth play. That's at least partly because it is expanding its range of products, with Telstra moving in to the e-healthcare space, for example. And, with the company targeting to generate at least a third of its revenue from faster growing Asian markets by 2020, it may catalyse investor sentiment and push the company's share price higher over the medium term.
Looking at the next couple of years, Telstra's earnings growth rate is due to jump to an annualised rate of 8.4%. That's a major improvement on the annualised earnings growth rate of 3.3% that has been delivered during the last decade. And, with Telstra trading on a price to earnings (P/E) ratio of 16.2 versus 16.7 for its sector, it could continue the run that has seen its share price double in the last five years.
Similarly, Domino's Pizza Enterprises Ltd. (ASX: DMP) is also a business in the midst of change, with it also deciding to expand into Asia at a rapid rate. This is likely to be a successful move, since Domino's has a proven business model in multiple regions across the globe and, with its menu constantly evolving and diversifying to a greater extent than most of its rivals, it has the capacity to move into new niches within the fast food space.
Clearly, Domino's has an excellent track record of growth with, for example, its cash flow per share rising at an annualised rate of 29.5% during the last five years. However, with its shrewd use of social media as well as gimmicks such as a GPS tracker on its delivery drivers/riders, it is likely to continue to appeal to its target market of teens and twenty-somethings, thereby offering an exciting future for its investors.
Meanwhile, Cochlear Limited (ASX: COH) is also enjoying an exciting period, with the release of multiple new products that are set to deliver a turnaround for a bottom line that has disappointed in the recent past. In fact, the medical device seller has posted a fall in earnings of 1.5% per annum during the last five years but, looking ahead, is expected to record a rise in net profit of 16% per annum during the next two years.
This, combined with a P/E ratio of 31 equates to a price to earnings growth (PEG) ratio of 1.95. Although higher than the ASX's PEG ratio of 1.5, Cochlear's beta of 0.5 indicates relative stability and resilience which could be very useful should the uncertain outlook for the wider market continue.
