ASOS plc, Boohoo.Com PLC & Reckitt Benckiser Group Plc: Are 20%+ Returns Achievable?

Until January of this year, the share price performance of online fashion retailer Boohoo.Com (LSE: BOO) had been extremely disappointing. For example, it listed in March 2014 at 85p and proceeded to post a continued decline in value before it reached a low of just 22p in January of this year. Since then, though, it has soared by 53% and, looking ahead, gains of over 20% are very much on the cards.

That’s at least partly because the UK economy is moving from strength to strength. Wages are rising faster than inflation and consumer spending is on the up, with an accommodative monetary policy likely to stay and push spending levels higher. Certainly, Boohoo.Com operates in other markets, too, but the UK remains a key place for the company, with an aggressive marketing campaign over the last year helping to boost its outlook.

On this front, the company is expected to increase its bottom line by 43% this year and by a further 27% next year. And, with it trading on a price to earnings growth (PEG) ratio of only 1, it appears to be all set to replicate the performance of 2015, rather than that of 2014, over the medium term.

Rival ASOS (LSE: ASC) has also had a positive 2015, with its shares being up 23% since the turn of the year. And, encouragingly for the company’s investors, it seems to have returned to a clear path to growth, with the company now focusing on its core markets (such as the UK) as opposed to seeking to diversify at a rapid rate, which was seemingly the company’s strategy in recent years.

This refresh in strategy is likely to have a positive impact on margins, since ASOS has previously invested heavily in pricing in new markets. With sales also forecast to show positive momentum, the company’s bottom line is expected to rise by 23% in the current financial year. While impressive, this growth rate is lower than that of Boohoo.Com and, with ASOS having a PEG ratio of 2.6, the former could continue to outperform the latter as it has done over the last six months. Furthermore, should ASOS’s financial performance fail to meet guidance, then its share price could be heavily punished.

Meanwhile, Reckitt Benckiser (LSE: RB) has been a strong performer in 2015. Its shares have risen by 21% since the turn of the year which is a superb performance given that the Chinese economic slowdown has hurt a number of its sector peers. Of course, Reckitt Benckiser is well-diversified, but the Asian economy represents a key part of its future growth strategy.

Clearly, the market is anticipating strong rises in demand for Reckitt Benckiser’s staple items which are due to benefit from the increasing wealth of the rising middle class across the emerging world. However, in the short term the company’s shares may prove to disappoint since Reckitt Benckiser is forecast to post an increase in earnings of just 3% in the current year and 7% next year. With the company’s shares having a price to earnings (P/E) ratio of 26.3, it may be prudent to wait for a keener valuation before buying.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.