Are ARM Holdings, Hargreaves Lansdown, and ASOS Titans of Tomorrow?

LONDON -- Micro-chip designer ARM Holdings  (LSE: ARM  ) (NASDAQ: ARMH  ) has long been a stock market darling. The huge rating that it traded on 10 years ago has been fully justified by its recent profitability.

Will buyers today be rewarded in the long term?

ARM has probably been the U.K.'s biggest beneficiary of the smartphone boom. In the last five years, its shares are up almost ninefold. In that time, dividends per share have more than doubled.

Its booming profits will be sure to attract competitors to its market. My concern is that, in the long term, shareholder returns could suffer as a consequence.

ARM currently trades on a 2013 price-to-earnings (P/E) ratio of 46.3 times expectations. The shares would fall hard from here if growth were to slow at any point in the next few years.

Hargreaves Lansdown
Investment shop-window Hargreaves Lansdown  (LSE: HL  ) dominates the U.K. market. The company continues to exploit its first-mover advantage, yielding impressive returns for shareholders.

Hargreaves Lansdown has long been traded on a high P/E. That hasn't stopped the shares from making big returns. In the last five years, investors have seen their money increase almost fourfold. Dividends have risen at an even faster pace, reaching 15.8 pence per share in 2012 vs. 3 pence for 2007.

Hargreaves Lansdown's current P/E ratio is around twice that of the average FTSE 100 company. With earnings per share (EPS) growth of 16.7% expected in 2014, that now looks a little rich. There are also signs that competition is heating up since the launch of Charles Stanley's "Direct" service at the beginning of the year.

ASOS
The investment case for ASOS  (LSE: ASC  ) is simple: The company is blazing its way to becoming the world's leading online clothing retailer.

Just look at the most recent December trading statement. U.K. sales up 34%. U.S. sales up 53%. EU sales up 65%. ASOS managed to increase sales 37% in the quarter ending in February. By comparison, FTSE 100 peer NEXT reported a 3.1% sales increase with its most recent results.

ASOS trades on a P/E of 65.8 times consensus 2013 forecasts, vs. 13.2 times for NEXT. Despite that huge difference, NEXT still has a market cap more than double that of ASOS.

Not only does ASOS need to deliver, it also needs the rest of the industry to continue trailing it to justify today's price. That's a lot to assume.

Although the growth that these companies have delivered in recent years is impressive, analysts here at The Motley Fool believe that they have found an even better growth share available in the market today. Like the three above, this company is a dominant player in its markets. Our team believes that 2013 could be the year that their pick delivers big returns. To find out which share they have identified and why they expect it to outperform, get the report "The Motley Fool's Top Growth Share for 2013." Even better, their report is completely free. Just click here to get your copy today.

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