Buy Hold Sell: 5 stocks with exceptional earnings growth

Ally Selby: Hey, how you doing? Welcome to Livewire's Buy Hold Sell. I'm Ally Selby, and today we're going to be analysing five companies with exceptional earnings growth. To do that, we're joined by Jun Bei Liu from Tribeca and Daniel Moore from IML.

REA Group (ASX: REA)

First up today we have REA Group, which is expected to grow its earnings per share by 28.46% over the coming year. Jun Bei, I'm going to start with you. Is it a buy, hold, or sell?

Jun Bei Liu (BUY): REA is a buy. It's an incredible business. I think listings have just turned a corner, and it's looking very positive, and usually it's a good lead indicator for where the earnings are going. And then the pricing power is very strong, and the operating leverage is coming through as well. It's a buy.

Ally Selby: The share price has rebounded around 37% over the past 12 months. It's trading on a forward PE of around 54 times, quite expensive. Most brokers rate the stock a hold. Daniel, over to you. Is it a buy, hold, or sell?

Daniel Moore (SELL): I'd love to say something better, but for me, it's a sell. I love the business, but the valuation is just too high for me, particularly given where interest rates are today. It's trading at similar levels to where it was when rates were 1%. So, too expensive for me.

Goodman Group (ASX: GMG)

Ally Selby: Next up today we have Goodman Group. It's expected to grow its earnings per share by 28.75% over the next 12 months. Daniel, staying with you. Is it a buy, hold, or sell?

Daniel Moore (SELL): Sell again, for me. It's up 70% since November on the back of the data centre theme. They've got some land they can use for development for data centres. Trading on around 30 times, which is really rich for primarily a development business. They'll make some really good returns from those data centre developments today, or over the next couple of years, but then they're going to have to restock that land bank at market values, where everyone's chasing land to build development centres.

Ally Selby: Most brokers actually disagree with you. It's rated as a strong buy. Jun Bei, over to you. Do you agree? Is it a buy, hold, or sell?

Jun Bei Liu (BUY): It's a buy. I love this show, that we all have very different opinions. That's what makes the market. I think this company… not only it's the best property company here in Australia and globally, it has dominated its industrial property space and the track record for management is incredibly strong, and now they just unveiled their exposure to the data centres. Right now, analysts' forecasts are really just assuming they'll build and then sell it off to a hyperscaler, or sell it off to the likes of other data centre operators. But there's every opportunity for this company to start thinking perhaps they can turn those into turnkey operation - they can turn into a NextDC if they want to.

Now, hyperscalers like Amazon, like Microsoft, they do require a lot of space, and they're trying to secure those spaces from Goodman Group and from others for many decades to come. So, an incredible amount of demand. It will underpin a significant amount of growth for this company, and it's not in analysts' numbers.

CSL Limited (ASX: CSL)

Ally Selby: Last up today we have ASX growth darling, CSL. It's expected to grow its earnings per share by 30.81% over the next year. Jun Bei, over to you. Is it a buy, hold, or sell?

Jun Bei Liu (HOLD): CSL is a hold for me at this point. I do think the earnings will grow for the next 12 months, because it has come from a very, very low suppressed stage in the last 12 months. So, everything's trending well for the next 12 months. However, structurally, I think CSL is facing a bit of a challenge, so say two, three years out, because they don't have the next product to drive that continued structural growth. So for me, it's harder to make it stack up as a strong buy. It's a hold for me.

Ally Selby: Its share price hasn't done that well over the past 12 months. It's down around 10%. It's trading on a forward PE of around 31 times. It's rated as a buy among the brokers. Daniel, last one for you today. Is it a buy, hold, or sell?

Daniel Moore (BUY): It's a buy for me. We actually just caught up with CSL at the Macquarie conference recently. The next three to five years outlook is really strong. We're talking double-digit earnings growth for the next three to five years. Market leader in its field. It's a business we really like.

Guest picks

Ally Selby: Okay. We asked our guests to bring along one stock that they believe has powerful earnings potential today. Daniel, what have you brought for us?

Lottery Corp (ASX: TLC)

Daniel Moore: The company I've got is The Lottery Corp. Powerful earnings might be a little bit of a stretch. I'd say it's really consistent earnings growth, which they've delivered over many, many years. What drives their growth is they've got unregulated pricing, so there's a lot of flexibility on their pricing each year. With their licenses, they can redesign games and create new games. They just created a new lottery only a few weeks ago. And then their online sales, as they grow, their margins improve over time because they don't have to pay commissions to newsagents. So, pretty good growth, probably around 7% per annum, but through the cycle.

Ally Selby: Over to you, Jun Bei. What stock do you think has exceptional earnings growth on the ASX?

Technology One (ASX: TNE)

Jun Bei Liu: I think this one hasn't been talked about all that much, but it is the highest quality. It's Technology One. This little business has really grown from homegrown Australia, now into international, and it has delivered double-digit returns year-in, year-out. And it's expected to continue to do so, and at a slightly higher rate as well. Management has proven to have this huge execution track record. We'll back this company any day.

Ally Selby: Okay. Well, I hope you enjoyed that episode as much as I did. If you did, why not give it a like. Remember to subscribe to our YouTube channel, we're adding so much great content just like this every single week.