With just 15 trading days to go until the end of calendar year 2015, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is set to end the year lower – currently it's down 7% year-to-date.
Thankfully, dividends received make the total accumulated return from the index slightly less negative, however, many investors will no doubt also be looking back on a 12-month period in which their portfolio went backwards.
Whether your portfolio underperformed or outperformed in 2015 what matters now is maximising the potential of your share portfolio in 2016.
One way to help narrow down the search for companies with the potential to increase in price is to focus on stocks with price-earnings-to-growth (PEG) ratios less than one.
A PEG ratio less than one implies that a stock may be "cheap" as the forward price-to-earnings ratio is less than the forecast earnings per share growth rate.
Here are three stocks which could help you achieve your goals in 2016…
- McMillan Shakespeare Limited (ASX: MMS) – this leading provider of salary packaging, vehicle leasing administration, fleet management and retail finance services is forecast to grow earnings per share (EPS) by 31% in the 2016 financial year (FY). That's obviously well above the wider market average yet the stock's forecast price-to-earnings (PE) ratio is just 10.4x.
- Thorn Group Ltd (ASX: TGA) – this financial services company and operator of the Radio Rentals brand is forecast to grow EPS by 12.5% in the current FY. Based on this forecast for EPS growth the stock is trading on a forward PE ratio of just 8x.
- Retail Food Group Limited (ASX: RFG) – this major owner of branded franchise systems including quick service restaurants such as Crust Gourmet Pizza Bar is forecast to produce a 17% rise in EPS this FY. If the company achieves this consensus forecast, it equates to a PE ratio of 9.6x based on the current share price of $4.40.
