Earnings per share, or EPS, shows the rate at which a company has grown its profitability. EPS growth is a good fundamental indicator of the future prospects of a company. Increased revenue and high profit margin drive the EPS growth of a company, and investors generally look for companies with higher EPS growth. Let’s delve into the strategies of three companies that are estimated to have more than 25% annual EPS growth in the long-term.
| Company | Annual EPS growth next five years |
|---|---|
| salesforce.com, inc. (NYSE:CRM) | 28.39% |
| ASML Holding N.V. (ADR) (NASDAQ:ASML) | 30.80% |
| Regeneron Pharmaceuticals Inc (NASDAQ:REGN) | 25.03% |
Source: finviz.com
Marketing software segment resulting high growth
In June 2013, salesforce.com, inc. (NYSE:CRM) announced the acquisition of ExactTarget Inc (NYSE:ET) for $2.5 billion. This deal will be complete by July 31, 2013. ExactTarget provides internet-based marketing software that helps companies run ad campaigns via email, mobile, and social networks. At present, the company has 7% market share of the marketing software segment. ExactTarget earns about 80% of its revenue from email marketing.
The increased number of online users is generating large amounts of digital data. With the help of marketing software tools, companies filter this data and analyze the information. Companies use this valuable information to deliver timely and targeted messages unique to the customer at various stages of the buying process to generate higher sales. According to IDC, the marketing software market is expected to grow to $5.5 billion in 2016, up from $4 billion in 2012.
Radian6 and Buddy Media software, products of salesforce.com, inc. (NYSE:CRM), provide tools to monitor and engage with the online users through social media. The company expects to earn more revenue as social media becomes the preferred platform to address customer service or product issues. The company’s marketing software segment will grow from 2% market share in 2012 to about 20% in 2016, generating around $1 billion in revenue.
EUV lithography to the rescue
ASML Holding N.V. (ADR) (NASDAQ:ASML) is working on improving the rate of producing its Extreme Ultraviolet, or EUV, tools. EUV lithography is the latest technology used for the manufacturing of computer chips. At present, ASML takes 18 months, from the time of order, to deliver EUV tools. The company aims to reduce this time to around 12 months in 2014.
The company has decreased its revenue estimation from EUV tools to $367.64 million from $590.85 million in 2013. ASML Holding N.V. (ADR) (NASDAQ:ASML) will deliver four out of six EUV tools scheduled for delivery in 2013. However, in 2014, it anticipates delivery of 12 tools, with plans to double this amount in 2015. The semiconductor industry is continuously shifting to latest EUV lithography. Therefore, ASML expects to earn more revenue in 2014 and 2015.
ASML Holding N.V. (ADR) (NASDAQ:ASML) completed the acquisition of Cymer, Inc. (NASDAQ:CYMI) on May 30, 2013. Cymer has been developing EUV laser technology for a decade. This laser technology is an important part of ASML’s EUV tool. The acquisition will help ASML to increase the production of EUV tools, reducing the risk of further delays.
ASML Holding N.V. (ADR) (NASDAQ:ASML) will also have access to Cymer, Inc. (NASDAQ:CYMI)’s installed base products, or IBP business. Cymer reported around $370 million in revenue from its IBP business in 2012. It also had 70% market share of deep ultraviolet light source in 2012. This acquisition will further add to ASML’s revenue.
Potential opportunity in Japan and the U.S.
Regeneron Pharmaceuticals Inc (NASDAQ:REGN)’s drug Eylea improves the vision of patients with age-related macular degeneration, or AMD, and myopic choroidal neovascularization, or mCNV. AMD destroys the central vision needed to see objects clearly and causes vision loss. mCNV is a disease related to the retina and also leads to vision loss. mCNV is the second-most common cause of vision loss in Japan.
