While I love dividend stocks for their steady income, growth stocks are the ones that can really transform a stock portfolio in a hurry.
The 10 companies listed below have posted the most rapid rates of earnings growth of those listed on the South African, Kenyan, or Nigerian stock exchanges over the past decade while continuing to boast returns on equity in excess of 15 percent, which suggests they are well-placed to continue their impressive performance.
Let’s count them down.
10. EOH Holdings
10-Year EPS Growth Rate: 27.1%
This South African information technology consulting and outsourcing business operates throughout Africa and the U.K. Launching with just one customer in 1998, the company has grown from strength to strength since then, posting 40 percent average revenue growth since 2003. After making a slew of acquisitions, the company’s now trying to consolidate its operations and focus on fostering organic growth.
9. NIC Bank
10-Year EPS Growth Rate: 27.6%
One of two Kenyan banks to appear on this list, NIC is in the midst of a management shake-up that saw the introduction of a new CEO. Already having expanded into Uganda and Tanzania in recent years, NIC is looking to deepen its service offering which presently includes insurance products and stock brokerage. It’s earnings growth has been remarkably consistent and averaged 28 percent over the past five years.
8. Famous Brands
10-Year EPS Growth Rate: 29.4%
As African incomes have grown, for better or worse, so has the appetite for fast food. Famous Brands is delighted to satisfy them with its stable of burger, pizza, and fried fish joints. The company has grown like crazy of late, but it hasn’t escaped the stock market’s notice. The stock isn’t exactly cheap at a price of more than 29 times trailing earnings.
7. REA Vipingo Plantations
10-Year EPS Growth Rate: 31.4%
REA Vipingo is Africa’s biggest producer of sisal. What the heck is sisal, you ask? Well, it’s a fiber derived from an agave plant that can be manufactured into rope and rugs. This humble business has helped REA Vipingo become one of the Kenyan stock exchange’s best performers. The stock price is up 51 percent over the past year and it still sports a minuscule 4.3 P/E ratio.
6. ARM Cement
10-Year EPS Growth Rate: 35.1%
If you’ve traveled to Nairobi any time in the past decade, you’ve no doubt noticed just how much construction is going on. It has inspired at least one analyst to quip that the nation’s official bird should be “the common yellow (construction) crane.” All this building needs cement and ARM cement not only manufactures the stuff but owns the limestone quarry that provides its key ingredient. The company’s CEO obviously believes in the company’s prospects. He’s bought a truckload of shares in the past five years and now owns 18 percent of the company.
5. Diamond Trust Bank Kenya
10-Year EPS Growth Rate: 36.6%
Founded in Kenya, this bank now operates in Tanzania, Uganda, and Burundi, too. It’s focused on serving small business customers and distinguishes itself by operating seven days per week. The stock looks remarkably priced at eight times trailing earnings. High-profile investors such as the International Finance Corporation and the Aga Khan Fund inspire confidence.
4. Okomu Oil Palm
10-Year EPS Growth Rate: 36.8%
This stock is a commodity play. Palm oil demand has soared over the past few years because its a nice substitute to trans fat-laden cooking oils and, in some countries, it’s also used as a bio-fuel. With news that Okomu will be doubling its production capacity, the stock has skyrocketed. It’s up 189 percent over the past 12 months.
3. Capitec Bank Holdings
10-Year EPS Growth Rate: 43.0%
A people’s bank, Capitec is focused on serving the needs of retail customers. It operates 520 branches across South Africa and has grown faster than even its frontier peers thanks to offering affordable and accessible banking services. Remarkably, the bank’s earnings growth has accelerated over time. It’s five-year EPS growth is 44.7 percent.
2. Howden Africa Holdings
10-Year EPS Growth Rate: 53.3%
Who knew that there was serious money to be made in fans and ventilation systems? Howden Africa’s South African shareholders have enjoyed a 34.5 percent annualized return over the past five years as their company sold stuff like compressors and heat exchangers to a wide variety of African industries. Howden’s sales growth (13.9 percent over the past five years) is lower than the other companies on this list, but it boasts an amazing 57 percent return on equity.
1. Pinnacle Technology Holdings
10-Year EPS Growth Rate: 62.3%
Pinnacle got in early on Africa’s info technology renaissance and reaped the rewards. The company, which sells hardware and software and holds exclusive rights to market some of the world’s premier technology brands, has grown earnings at a rate of more than 40 percent over the past 18 years. The stock now trades at a P/E ratio of just 12.0.