5 Stocks Geared for Growth

• Email
• Share
• Print

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 140,000-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)
Atwood Oceanics (NYSE: ATW)	37%	57%	22%	22%	*****
Hudson City Bancorp (Nasdaq: HCBK)	21%	25%	32%	49%	****
NCI (Nasdaq: NCIT)	30%	46%	39%	32%	***
Ralcorp (NYSE: RAH)	28%	27%	39%	45%	****
Teekay LNG Partners (NYSE: TGP)	25%	69%	102%	34%	***

Sources: Capital IQ, a division of Standard & Poors; Motley Fool CAPS.

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. After all, they appear to be sales and profits machines.

Tippling at the speakeasy
Sometimes bank branches can sprout up overnight in neighborhoods like mushrooms -- or Starbucks coffeehouses. And with the turmoil the industry has faced, they can change ownership just as quickly. Hudson City Bancorp has taken advantage of the upheaval and has extended its reach deeper into the tri-state area of New Jersey, New York, and Connecticut that it already caters to. It reported yesterday that over the past year ending in June, its targeted growth strategy has worked to achieve deposit market share gains in 96% of its branch locations.

The bank's stellar reputation for conservatism has served it well in keeping a lid on non-performing assets -- accounting for a minuscule less than 1% of total assets -- and has helped it in its quest for greatness. Charge-offs amounted to only $13 million, while the FDIC says Hudson City increased customer deposits year over year by 88.2% in Connecticut, 59.9% in New York, and 23.5% in New Jersey.

All this could be why Jim Cramer looks at Hudson City with puppy-dog eyes. On a recent show, the Mad Money host crooned:

Here is one of the, if not the most responsible large lender in the country … it has got reserves galore … hardly any bad loans … it is one of the few banks that actually made you money in 2008 ... and this year it has been left in the dust … it is down 24% over the last 12 months … what is wrong with this picture?

Highly rated CAPS All-Star member forexnutca thinks Cramer's repeated fawning over the S&L gets to be a bit much after a while, but you can't argue with his logic:

One of the very few stocks I agree with Cramer on. Regional banks are out of favor right now, so it makes a good long term investment. Rising Dividends, excellent CEO (although I'm not a fan of him showing up on Mad Money all the time), with value and growth! One of the very few bank stocks that I can find that haven't really participated in this rally. Bought some for my self directed 401k.

As one of the top-rated banks in CAPS' Thrifts & Mortgage Finance sector, Hudson City has surprisingly underperformed its peers. Where mortgage servicer Ocwen Financial (NYSE: OCN) and banking giant JPMorgan Chase (NYSE: JPM) have soared despite financial difficulties (well, in traditional banking circles for JPMorgan; investment banking has been going gangbusters), and the Thrift sector itself is down only 8% over the past year, as Cramer notes, Hudson City has tripled that decline.

With a history of conservatism, a strong portfolio of loans, and a valuation well below that of its projected growth rate, I'm going long on Hudson City Bancorp on my CAPS profile.

No Great Depression
How about you? Would you buy Hudson City at today's prices? Let us know in the comments section below.

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 fill up our dance card with?