Some ASX shares are exposed to very supportive tailwinds, which can be helpful for earnings and potentially the share price as it plays out.
The share prices I'm going to refer to have already gone on strong runs. I'm not saying the below two stocks are cheap – but they could keep rising over the long term because of that tailwind support.
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Propel Funeral Partners Ltd (ASX: PFP)
Propel is the second-largest funeral operator in Australia and New Zealand. As the saying goes, there are only two things certain in life – death and taxes. And we can't invest in the Australian Taxation Office (ATO).
Funeral providers are in a very defensive industry, which means the company may be able to generate a consistent base level of earnings each year, depending on the number of funerals that are performed each year.
According to the Australian Bureau of Statistics (ABS), death volumes are expected to increase by 2.5% per annum from 2023 to 2030 and 2.9% from 2030 to 2040.
The average revenue per funeral is also increasing for the ASX share – it rose by 4.5% in the FY24 first-half period to $6,630.
A combination of more funerals and more revenue per funeral can help the company's organic revenue growth. It's also steadily growing by making acquisitions which can increase its geographic presence.
According to the projections on Commsec, it's predicted to grow its earnings per share (EPS) by 23% between FY24 and FY26.
Goodman Group (ASX: GMG)
Goodman is one of the biggest businesses on the ASX, with a market capitalisation of $63 billion.
It has become a huge ASX share by developing industrial property estates around the world. There is growing demand for industrial property because of the importance of logistics for businesses and the long-term growth of e-commerce (which requires distribution centres).
The large demand for industrial property is helping drive the rental income higher, boosting the business' operating profit.
One of the most exciting shifts by the business is that it's now planning to become heavily involved in the data centre space. In the recent FY24 first-half result, it said it had made significant progress on advancing and expanding its global data centre power bank – "securing power and planning, commencing infrastructure and working with customers on optimal delivery models that best suit their needs". It said it has reached 4GW.
Its total work in progress (WIP) is $12.9 billion, with a development yield on cost of 6.7%, with data centre projects representing 37% of WIP.
The ASX share said that "data centres are expected to be a key area of group for the group" and have "attractive development margins on existing and new projects".
NAOS Asset Management recently shared two quotes about data centres. Stuart Gibson, the co-CEO of ESR Group Ltd (the largest real estate manager in the Asia Pacific region) said:
The entire Asia Pacific region is becoming a really attractive market for data centre development and is expected to remain so for decades to come, given the explosion in data processing demand in this part of the world.
Yukio Kani, CEO of JERA Co (Japan's largest power provider) recently said:
It's [data centre power requirements] a very hungry caterpillar.
