• Morningstar analyst spots two long-term ASX winners
  • ResMed eyes massive sleep market growth
  • PWR dominates F1, expands into aerospace

 

Joseph Taylor, an analyst from Morningstar, found two ASX companies that share similar qualities to the likes of Monster Beverage, a US company that grew its earnings per share 17-fold since 2015.

Both these stocks meet the criteria Taylor is looking for in long-term winners: solid earnings growth, competitive advantages, and leadership that keeps a sharp eye on the future.

Here’s a closer look at his two promising ASX players.

 

ResMed: A sleep apnea giant with plenty of room to grow

First up, Taylor is bullish on ResMed (ASX:RMD), the global leader in sleep apnea devices.

ResMed might seem like a stock that’s already had its time in the sun, but Taylor warns that dismissing it now could be a mistake.

“ResMed has grown its revenue at an average of 11.6% for the past decade,” says Taylor, noting that the company has also managed to increase its profit margins as it scaled up.

But more growth looks likely, he believes, especially as there’s huge untapped potential in the sleep apnea market.

“Only 20% of sleep apnea cases go treated in developed economies, with essentially no treatment in emerging markets.

“This leaves plenty of room for ResMed to sell more devices.”

ResMed also benefits from an economic moat, which Taylor describes as a “narrow” but effective one, with factors like high switching costs for medical professionals and a strong brand.

Taylor expects ResMed to grow its earnings per share by 12% annually over the next five years.

Despite the company’s large size, Taylor draws a comparison to Apple, which continued to deliver growth long after its iPhone boom.

“Even when Apple looked like it had reached its peak, it went on to triple its earnings per share, largely thanks to its growing services business,” he says.

 

PWR Holdings: From motorsport to aerospace

Next, Taylor is hot on PWR (ASX:PWH), a company that has carved out a niche in the high-performance automotive world by providing cooling systems for elite racing cars, including Formula 1.

PWR’s expertise in making radiators for supercars and small production road cars has helped it grow into the preferred supplier for the motorsport world.

In fact, PWR’s radiators now cool every single Formula 1 car on the grid.

PWR’s strong position in motorsport has given it a significant competitive advantage.

“PWR has leveraged this reputation for quality and proven performance to win a strong share of high-performance automotive work and premium aftermarket customers,” Taylor explained.

But PWR’s ambitions don’t stop at racing.

The company has expanded into aerospace and defence, a move that Taylor says has shown promising results.

“PWR has gone from having no presence in aerospace in 2016 to generating $21 million in sales in 2024.”

Looking ahead, the company expects its aerospace and defence business to triple its top line revenue by 2026.

PWR’s CEO, Kees Weel, is deeply involved in the company’s long-term strategy, with his family still holding over 16% of the stock.

However, as Taylor reminds us, always consider your investing criteria and long-term strategy before jumping in.

 

 

The views, information, or opinions expressed in this article are solely those of the research firm and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

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