5 Stocks Geared for Growth

Recs

6

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A stock's price follows the company's earnings, which in turn follow the company's 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 that inspire analysts' confidence in continued growth -- should give us a fertile field of 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 140,000-plus members think have the best chances of beating the market over the long haul.

Company

3-Year Revenue Annual Growth %

3-Year EPS Annual Growth %

Estimated 2-Year Future EPS Growth

Estimated 2-Year Future Revenue Growth

CAPS Rating (out of 5)

FTI Consulting (NYSE: FCN)

29%

21%

42%

30%

***

Gilead Sciences (Nasdaq: GILD)

34%

32%

43%

43%

****

Royal Gold (Nasdaq: RGLD)

238%

30%

135%

74%

****

Vistaprint (Nasdaq: VPRT)

50%

40%

42%

44%

*

Zhongpin (Nasdaq: HOGS)

81%

34%

62%

74%

*****

Source: Capital IQ, a division of Standard & Poor's; Motley Fool CAPS.

Just because an analyst predicts that a company will feature fantastic growth doesn't mean those predictions will become reality. But analysts' preferred picks do offer an excellent starting place for your own research into extreme buying opportunities, so let's see why some of these companies may or may not be held in high esteem by some investors, considering that they appear to be sales and profits machines.

Tippling at the speakeasy
There's nothing like a worldwide pandemic to boost your prospects, but Gilead Sciences has both conditions and technology on its side. The biopharmaceutical offers Tamiflu, one of only two drugs that is effective against the swine flu virus that is expected to hit with a vengeance this season (the other drug is Relenza, marketed by GlaxoSmithKline (NYSE: GSK)). President Obama has urged everyone to get vaccinated this year because the flu has become the world's fastest-moving influenza pandemic.

CAPS member Wendykitty finds this short-term catalyst just a part of the reason she picks Gilead Sciences to outperform the market: "When the flu season starts they will get royalties on Tamiflu. Think of H1N1 coming. Sad but true! This is a great company anyway."

It is Gilead's HIV therapies, however, that continue to drive growth. Sales of Atripla rose 60% in the second quarter, while those for Truveda increased 18%. When the swine flu subsides, these are the drugs that will continue to carry Gilead.

What a life
Will Vistaprint, an online supplier of graphic design services and customized printed products to small businesses and consumers, keep on growing as fast as it has? On the one hand, it has enjoyed 50% compounded annual revenue growth over the past three years, with sales hitting $515 million for the year ended in June. While it might face some limited competition from the likes of Staples (Nasdaq: SPLS), which has started opening stand-alone copy and print shops (it had 18 such stores in the most recent quarter), Vistaprint has shown some remarkable resilience by targeting businesses with just 10 or fewer employees.

But one online critic who analyzed the business model suggests that the future may not be so bright if Congress has its way. A small portion of Vistaprint's revenues come from third-party referrals, but they account for a large percentage of its net income. Congress is considering regulating some operators who use similar types of referral programs, and if it does, Vistaprint's bottom line could be severely hurt. The Wall Street Journal had uncovered this risk more than a year ago, but it hasn't abated since then.

Although 70% of the CAPS members rating the print shop pick it to outperform the market, it carries the lowest rating -- one star -- suggesting that members believe there are better opportunities elsewhere.

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 have to say about these or any other stocks?

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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.

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Related Tickers

11/24/2009 4:00 PM
VPRT $50.25 Down -0.04 -0.08%
VistaPrint Limited CAPS Rating: *
FCN $46.53 Up +0.29 +0.63%
FTI Consulting, In… CAPS Rating: ****
GSK $42.28 Up +0.14 +0.33%
GlaxoSmithKline pl… CAPS Rating: *****
GILD $46.96 Down -0.05 -0.11%
Gilead Sciences, I… CAPS Rating: *****
RGLD $53.87 Down -0.21 -0.39%
Royal Gold, Inc. CAPS Rating: ***
SPLS $23.22 Up +0.02 +0.09%
Staples, Inc. CAPS Rating: ***
HOGS $14.08 Down +0.00 +0.00%
ZHONGPIN INC. CAPS Rating: *****

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