Three Companies With Solid EPS Growth
Madhukar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Earnings Per Share (EPS) growth is one measure of a company's profitability. Since it is often the most commonly discussed performance metric, it tends to drive share prices. In order it improve EPS, companies focus on organic and inorganic growth opportunities available to them.
This article contains analysis of three companies expecting EPS growth of more than 25% in next five years due to various strategies. Let's find out how these strategies will drive investor interest in each company.
EPS (Next 5 years)
Gilead Sciences (NASDAQ: GILD)
Siemens Aktiengesellschaft (NYSE: SI)
Amazon.com (NASDAQ: AMZN)
New drugs will drive future revenue
Gilead Sciences has successfully completed research and development of its potential blockbuster drug “Sofosbuvir”. It’s an oral medication used for the treatment of Hepatitis C. According to WHO, around 3% of the world’s population, or 203.2 million, suffer from the Hepatitis C Virus, or HCV. In Europe nearly 5 million people are suffering from HCV. The European Medicines Agency granted the marketing of “sofosbuvir” in all 27 European Union countries, and it will be available in 2014.
The company is also working on the FDA approval of Sofosbuvir. In the U.S., around 3.2 million carry HCV. The approval news of this drug will create a substantial opportunity for Gilead Sciences.
Additionally, in August 2012 the company received FDA approval to sell its new combo HIV drug “Stribild.” Stribild has contributed $92.1 million in the first quarter 2013 and rose by 130.3%, quarter-over-quarter. In the U.S. around 1.2 million people are suffering from HIV and around 50,000 people become infected each year.
In May 2013 Gilead Sciences also received approval for the sale of Stribild from the European Committee. The European approval for HCV and HIV drugs will enhance the company’s total revenue by 10.8% to $10.75 billion in 2013, and $12.58 billion by 2014 compared to $9.7 billion last year.
Strong future growth opportunities
Siemens has been working in Brazil for 140 years and generated revenue of around $2.62 billion in the fiscal year 2012. It has recently received a contract of around $1.31 billion from the Brazilian government for infrastructure solutions. In this contract, Siemens will provide technological solutions for building the world's greenest stadium, enhancing the transportation facilities, and bolstering energy supply in the country.
Brazil is hosting the Confederations Cup in 2013 and the FIFA World Cup in 2014. The company will also enhance airport capacity so that it can serve the around 40 million passengers who are expected to visit Brazil for FIFA Cup in 2014.
Siemens is currently in the process of selling its non-core telecom assets and shifting its focus to turnkey projects in energy, industry, and infrastructure. In April the six-year old joint venture with Nokia (NYSE: NOK), the Nokia Siemens Networking, or NSN, expired. Siemens held a non-controlling stake of 50% in this venture while Nokia held the controlling stake. With the end of the venture both the companies have the right to sell their stake through a buyout or public offerings. The companies have started searching for buyers for their stake in NSN. If NSN goes through a public offerings it expects to generates cash of $9.17 billion which will help Siemens grow its main business.
Kindle movement towards emerging markets
After giving some serious competition to Apple's iPad in the U.S., Amazon.Com is planning to enhance its footprint in emerging markets, like India, by launching “Kindle” products on the marketplace. Sales of Kindle Fire HD 7-inch, Fire HD 8.9-inch, and Kindle Paperwhite tablets will start from June 27, 2013.
Its Fire HD will give access to more than 1.9 million applications, games, and nearly 0.33 million books which are exclusively available on the Kindle store. The products will be priced from $270 to $372. Kindle Paperwhite, a fifth generation device, will be available in a Wi-Fi and 3G Wi-Fi version, at a price of $186 and $237 respectively.
Amazon Web Services, or AWS, held 26% share of the U.S. e-commerce market in 2012. U.S. online retail sales will capture the market share of physical stores, and will grow by 13% to $262 billion in 2013 at a CAGR of 10% in the next five years. This growth will continue as physical stores change their strategy and invest in web-based businesses.
The company is also planning to increase its presence in the Asia-Pacific region, which is approximately one-third of the global e-commerce business. The e-commerce business in this region increased by 33% to $332 billion in 2012, and is expected to grow by 30% to $433 billion in 2013. Amazon reported revenue of $798 million in the quarter ending in March 2013, and is expecting to generate revenue of $3.8 billion by the end of this year.
It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.
Gilead, with the European approval for its new drugs, used in the treatment of HIV and HCV patients, generates good future growth opportunities.
Siemens' new contract of $1.33 billion from Brazilian government and plan of exiting from the NSN is expected to generate higher revenue and better cash flow.
Amazon, with its new Kindle Fire HD, is expected to capture the majority of the tablet market in India. And, with the growth of online retail business, its AWS service will generate opportunities for its future growth.
Due to strong growth strategies being implemented by these companies, a buy is recommended.
Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Gilead Sciences. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!