A stock's price follows its earnings, which in turn follow its sales. A company needs only to take care of its business for investors to profit in the long run.
With that in mind, examining companies whose revenues and profits are rising -- and which inspire analysts' confidence in continued future growth -- should give us a fertile field in which to discover solid candidates for long-term outperformance.
The roaring 20s
Below are a handful of companies that have enjoyed 20% or more annual growth in sales and earnings over the past three years, and for which analysts forecast total growth of 20% or more over the next two years. We'll then pair up those predictions with the community stock research at Motley Fool CAPS, to get an idea of which companies the 135,000-plus members think have the best chances of beating the market over the long haul.
|
Company
|
3-Year Past Revenue Annual Growth
|
3-Year Past EPS Annual Growth
|
Est. 2-Year Future EPS Growth
|
Est. 2-Year Future Revenue Growth
|
CAPS Rating
(out of 5)
|
|
Amazon.com
(Nasdaq: AMZN )
|
30%
|
29%
|
45%
|
41%
|
**
|
|
Baidu.com
(Nasdaq: BIDU )
|
91%
|
113%
|
89%
|
93%
|
***
|
|
Gilead Sciences
(Nasdaq: GILD )
|
34%
|
32%
|
42%
|
43%
|
****
|
|
Green Mountain Coffee Roasters
(Nasdaq: GMCR )
|
54%
|
68%
|
206%
|
131%
|
*
|
|
Research In Motion
(Nasdaq: RIMM )
|
77%
|
78%
|
41%
|
67%
|
**
|
Source: Capital IQ, a division of Standard & Poor's; Motley Fool CAPS. EPS = earnings per share.
Of course, just because an analyst predicts that a company will feature fantastic growth opportunities, doesn't mean those predictions will become reality. But their preferred picks do offer an excellent starting place for your own research into extreme buying opportunities, so let's see why the operations of some of these companies may or may not be held in high esteem by investors, considering they appear to be sales and profits machines.
Tippling at the speakeasy
Those are some impressive numbers Research In Motion is putting up, but can it stop the onslaught unleashed by Apple's (Nasdaq: AAPL ) continued success in the smartphone market? It doesn't seem likely, but that doesn't mean RIM can't continue to be one of the leaders in a competitive field.
There are several arguments currently weighing on Research In Motion. Cell-phone sales fell 10% in the first quarter of 2009, but the smartphone market jumped 13%. The troubling aspect is that Apple's iPhone accounted for 70% of that growth in the given quarter.
Research In Motion's app store also has a paltry selection of 2,000 titles, compared with Apple's 64,000-plus titles. Considering the new iPhone is scheduled to be launched in China in the next few months, Research In Motion is hard-pressed to develop a new product to combat it.
Yet analysts estimate the company has 17% of the smartphone market. It might grow to 21% by the end of this fiscal year as more smartphones are sold to consumers and AT&T (NYSE: T ) refocuses it attention after the marketing extravaganza it launched for the iPhone release. While the new BlackBerry Tour has both positive and negative aspects to its appearance and functionality, it may be the improvement the company needs to gain momentum after the BlackBerry Storm.
With smartphone technology upgrades running on a two- or three-year replacement cycle, Research In Motion still stands to gain from the potential growth that swells within this segment.
While acknowledging the company needs to introduce superior products, CAPS member CaptBS believes it can still outperform the market:
A pioneer and leader in a rapidly expanding market. Although some of their recent offerings leave something to be desired (e.g. the Storm), their solid foothold in the business smartphone market alone (with all of the associated push-email and app-store revenue) will help them outperform the S&P for another year or two, regardless of whether their devices and apps catch on with the consumer market.
No Great Depression
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Why not head over to the completely free CAPS service and let us hear what you've got to say about these or any other stocks that you think we should put on our dance card?
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