When investing, the goal is usually to find a business that is capable of sustainable growth over time. In this way, an investor can make money as profits and dividends compound over multiple years. Here are 3 companies that I think fit the bill today:
CSL Limited (ASX: CSL)
CSL is a blood products and vaccine company widely described as Australia's best listed company. This business has a long track record of growth, and is able to increase earnings by researching new treatments, and buying back shares – which reduces the number of shares on issue, increasing earnings per share.
While CSL looks expensive, it has a number of promising products in its research pipeline and is worthy of closer investigation.
Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)
Fisher & Paykel Healthcare designs and manufactures oxygen masks and breathing equipment, a field with significant barriers to entry due to patents and the time it takes to build trust among medical professionals. The company has been expanding capacity to meet anticipated future growth, and benefits from tailwinds of ageing populations and rising obesity. Additionally, Fisher & Paykel expect to report significantly lower manufacturing costs in the future, as a result of shifting manufacturing from New Zealand to Mexico.
On the downside, the company is currently engaged in an expensive patent dispute with Resmed Inc. (CHESS) (ASX: RMD) which makes today's high price tag look risky.
Bapcor Ltd (ASX: BAP)
Bapcor is an automotive parts supplier that has been growing by expanding its parts supply network, as well as the number of retail stores that it owns and supplies. Management is also diversifying into electronic parts supply, which is set to become a much more important field over the next two decades. Bapcor grows primarily by acquisition, as it expands its footprint it is able to supply more businesses faster, as well as attain lower costs from its suppliers, improving margins.
With the recent expansion in New Zealand, Bapcor's growth may slow as it decides what to do with a footwear retailer and an oil services business, which it acquired as part of an auto parts acquisition in that country. Even so, Bapcor appears to have significant growth potential ahead.
