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 with rising revenues and profits -- 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.
Below are a handful of companies that have enjoyed 15% or more annual growth in sales and earnings over the past three years, and for which analysts forecast total growth of 15% or more for both 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 145,000-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 Annual EPS Growth |
Est. 2-Year Future Annual Revenue Growth |
CAPS Rating (out of 5) |
|---|---|---|---|---|---|
|
AsiaInfo Holdings |
32% |
90% |
36% |
33% |
*** |
|
Cognizant Technologies |
36% |
32% |
18% |
18% |
*** |
|
Kapstone Paper & Packaging |
51% |
56% |
16% |
17% |
**** |
|
Lincoln Educational Services |
18% |
25% |
64% |
34% |
**** |
|
Western Digital |
19% |
28% |
55% |
19% |
**** |
Sources: Capital IQ, a division of Standard & Poor's; 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, since they appear to be sales and profits machines.
Grinding down the competition
The PC market was supposed to be a laggard in this economy, but as more tech companies report earnings, it's becoming apparent that it was instead a prime source of surprising strength. Disk drive makers Western Digital and Seagate Technologies
We had an inkling of how well the sector was going to do when retailers reported that December sales of consumer electronics bounced more than 7% higher over the year-ago period. While 2008 was pretty much the year when Christmas never came for retailers, the strong showing this time around demonstrated consumers’ pent-up demand. Microsoft
Western Digital shipped 49.5 million units in the quarter and generated gross margins of more than 26%, easily surpassing the 15.9% gross profit spread from a year ago. Analysts expect the combination of increased demand and attractive pricing to keep Western Digital's disk drives humming.
It was last December that CAPS member Hotpicks101 predicted the company would continue its trend of upending analyst expectations:
It's a tech stock that has constantly beat earnings forecasts quarter after qrtr, gaining free cash flow and trades at a PE ratio of around 15. Wish I would have seen this one earlier since it's overbought and may fall hard if market decides to turn on us but still a good investment for the long term.
The CAPS community has put the right spin on the drive maker, as 94% of the 1,002 members rating the company have marked it for outperformance. You can share your own opinion on the Western Digital CAPS page as to whether this computing revolution will continue.
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 you think we should fill up our dance card with?
