Today I am looking at four stock market stars with terrific earnings prospects.
Fears over market saturation across the critical smartphone and tablet computer markets has seen shares in chipbuilder ARM Holdings (LSE: ARM) fluctuate wildly in recent months. Of course this issue, combined with the effect of rising competition in from industry giants like Intel, is not to be overlooked.
Still, for many commentators the Cambridge firm’s close alliance with industry giants like Apple should keep profits powering higher — pre-tax profits leapt 24% during January-March — while recovering consumer spending power in many territories should also boost demand for premium devices. Meanwhile, ARM Holdings’ diversification into other hot areas like networks and servers is helping to reduce its reliance on these markets.
Consequently the City expects earnings to rise 74% this year alone before shooting 20% higher in 2016. It is certainly true that ARM Holdings’ elevated P/E multiples of 36.5 times and 30.8 times for these years makes the business an expensive, and potentially volatile, stock selection. But the firm’s ability to keep churning out new licence agreements with blue-chip customers is still a promising omen for future growth, and therefore arguably makes the microchip geniuses worthy of this premium rating.
Like ARM Holdings, insurance play Standard Life (LSE: SL) is expected to deliver splendid earnings expansion as investment inflows click through the gears. The business saw assets under management leap 5% during the first quarter to £311.9bn, helped by improving market confidence and a rising emphasis towards new regions — Standard Life sourced three-quarters of net inflows from outside of the UK during January-March.
With the insurer also expected to boost organic growth with further acquisitions, earnings are anticipated to bounce 68% higher in 2015 before galloping an extra 19% higher next year. As a result Standard Life’s P/E ratio of 18.5 times for this year falls to just 15.8 times for 2016 — any number around or below 15 times is widely regarded as excellent value. Meanwhile PEG readouts below the value marker of 1 through to end-2016 underline the firm’s brilliant value.
I believe that the healthy housing market should keep the bottom line rattling higher at Redrow (LSE: RDW). The business opened an office in the West Country earlier this year to cotton onto surging homes demand, and with interest rates expected to remain at low levels well into next year at least; lenders falling over themselves to provide finance to housebuyers; and the number of existing homes entering the market at multi-decade lows, I reckon Redrow’s homesteads should sell like hotcakes.
Consequently the number crunchers expect Redrow to clock up earnings growth of 48% in the year concluding June 2016, resulting in an earnings multiple of just 10.4 times — a readout around or below 10 times is generally considered unmissable value. And this value slips to 9.4 times for fiscal 2016 amid expectations of a further 14% bottom-line bulge. And similar to Standard Life, Redrow boasts PEG multiples below the threshold of 1 through to the end of next year.
With leading positions across Europe, Canada and Brazil, I reckon that Just Eat (LSE: JE) is a great way to grab hold of juicy growth potential. The takeaway sector has long been a godsend for couch potatoes the world over, and with an increasing number of orders being placed via the internet, I believe that the chow aggregator is in great shape to maintain its stranglehold on the market.
Accordingly the City expects Just Eat to punch terrific earnings growth of 41% in 2015, and additional expansion of 51% is pencilled in for 2016. It is true that these figures leave Just Eat changing hands on eye-watering P/E multiples of 77.1 times and 52.5 times for these years. But I believe that the firm’s rising dominance in a rapidly-expanding marketplace makes these heady multiples easier to swallow.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and owns shares in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.