Looking for profitable companies that show promise down the road? For this list, we explored a universe of stocks that are currently experiencing strong upward momentum and have analyst expectations for further growth in the years ahead.
To start, we collected a list of names rallying above their 20, 50, and 200-day moving average. This signals that the company is rapidly increasing in value and surrounded by positive market sentiment.
We sorted through those names for those that show promise of continuing on their upward trend. To do that, we looked at five-year earnings per share data. We screened only the names that analysts expect to grow more than 20% in the next five years.
The DuPont equation
Both of these data points indicate high growth, but these data points should not be used alone. It's important for investors to understand the sources for that growth -- is it sustainable?
With that in mind, we collected data on profitability sources. One of analysts' favorite profitability tools is DuPont analysis. It's a way to look at changes in return on equity (ROE) profitability [i.e., net income/equity] by attributing those changes to certain sources. Some of the sources are more sustainable than others, thereby giving an analysis of strength in increasing profitability.
DuPont analysis breaks up a company's ROE into three components: net margin, asset turnover, and leverage. Companies with increasing ROE along with increasing net margin, increasing asset turnover, and decreasing leverage are viewed favorably.
Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.
The list
Do you think these high-growth companies have strong enough profitability to rally higher and meet analyst expectations?
List sorted by change in ROE. (Click here to access free, interactive tools to analyze these ideas.)
1. AeroVironment (Nasdaq: AVAV ) : Designs, develops, produces, and supports unmanned aircraft systems (UAS), and efficient energy systems for various industries and governmental agencies. Market cap of $708.08M. EPS growth next 5 years at 20.83%. The stock is currently trading 0.54% above its 20-day MA, 0.48% above its 50-day MA, and 3.29% above its 200-day MA. MRQ Net Profit Margin increased to 8.20% from 0.41% year-over-year, Sales/Assets increased to 0.25 from 0.23, while Assets/Equity decreased to 1.18 from 1.19.
2. Neurocrine Biosciences (Nasdaq: NBIX ) : Engages in the discovery, development, and commercialization of drugs for the treatment of neurological and endocrine-related diseases and disorders in the United States. Market cap of $411.69M. EPS growth next 5 years at 69%. The stock is currently trading 11.35% above its 20-day MA, 13.85% above its 50-day MA, and 6.25% above its 200-day MA. MRQ Net Profit Margin increased to 75.38% from 23.04% year-over-year, Sales/Assets increased to 0.28 from 0.10, while Assets/Equity decreased to 2.58 from 9.0.
3. Allot Communications (Nasdaq: ALLT ) : Engages in developing, selling, and marketing Internet protocol service optimization solutions in Europe, the Middle East, Africa, the Americas, Asia, and Oceania. Market cap of $541.03M. EPS growth next 5 years at 38%. The stock is currently trading 11.86% above its 20-day MA, 28.92% above its 50-day MA, and 27.1% above its 200-day MA. MRQ Net Profit Margin increased to 10.35% from 5.11% year-over-year, Sales/Assets increased to 0.20 from 0.17, while Assets/Equity decreased to 1.39 from 1.41.
4. Golar LNG (Nasdaq: GLNG ) : Engages primarily in the transportation, regasification, and liquefaction of LNG. Market cap of $3.54B. EPS growth next 5 years at 80%. The stock is currently trading 1.67% above its 20-day MA, 10.49% above its 50-day MA, and 32.81% above its 200-day MA. MRQ Net Profit Margin increased to 17.67% from 5.86% year-over-year, Sales/Assets increased to 0.03 from 0.03, while Assets/Equity decreased to 3.86 from 5.37.
5. Omnicell (Nasdaq: OMCL ) : Offers automated solutions for hospital medication dispensing and supply management primarily in the United States and Canada. Market cap of $552.12M. EPS growth next 5 years at 26.5%. The stock is currently trading 5.11% above its 20-day MA, 7.5% above its 50-day MA, and 8.93% above its 200-day MA. MRQ Net Profit Margin increased to 4.64% from 2.27% year-over-year, Sales/Assets increased to 0.18 from 0.17, while Assets/Equity decreased to 1.29 from 1.30.
6. Constant Contact (Nasdaq: CTCT ) : Provides on-demand email marketing, social media marketing, event marketing, and online survey solutions primarily in the United States. Market cap of $746.47M. EPS growth next 5 years at 40.6%. The stock is currently trading 9.91% above its 20-day MA, 19.55% above its 50-day MA, and 5.06% above its 200-day MA. MRQ Net Profit Margin increased to 9.84% from 6.56% year-over-year, Sales/Assets increased to 0.29 from 0.28, while Assets/Equity decreased to 1.32 from 1.36.
7. Rackspace Hosting (NYSE: RAX ) : Operates in the hosting and cloud computing industry. Market cap of $5.77B. EPS growth next 5 years at 30.35%. The stock is currently trading 2.77% above its 20-day MA, 7.72% above its 50-day MA, and 8.62% above its 200-day MA. MRQ Net Profit Margin increased to 7.55% from 5.91% year-over-year, Sales/Assets increased to 0.27 from 0.26, while Assets/Equity decreased to 1.76 from 1.84.
8. DXP Enterprises (Nasdaq: DXPE ) : Distributes maintenance, repair, and operating products (mro), equipment, and services to industrial customers in the U. Market cap of $441.19M. EPS growth next 5 years at 25.8%. The stock is currently trading 4.66% above its 20-day MA, 20.77% above its 50-day MA, and 25.37% above its 200-day MA. MRQ Net Profit Margin increased to 3.98% from 3.10% year-over-year, Sales/Assets increased to 0.61 from 0.56, while Assets/Equity decreased to 2.33 from 2.69.
9. OSI Systems (Nasdaq: OSIS ) : Designs, manufactures, and sells specialized electronic systems and components for applications in homeland security, health care, defense, and aerospace markets worldwide. Market cap of $930.62M. EPS growth next 5 years at 24.83%. The stock is currently trading 3.24% above its 20-day MA, 9.4% above its 50-day MA, and 19.27% above its 200-day MA. MRQ Net Profit Margin increased to 2.95% from 2.64% year-over-year, Sales/Assets increased to 0.27 from 0.25, while Assets/Equity decreased to 1.54 from 1.56.
10. Shuffle Master (Nasdaq: SHFL ) : Develops, manufactures, and markets technology and entertainment-based products for the gaming industry worldwide. Market cap of $640.71M. EPS growth next 5 years at 25%. The stock is currently trading 6.77% above its 20-day MA, 13.01% above its 50-day MA, and 19.68% above its 200-day MA. MRQ Net Profit Margin increased to 15.65% from 11.33% year-over-year, Sales/Assets increased to 0.18 from 0.17, while Assets/Equity decreased to 1.46 from 1.83.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. ROE data sourced from Google Finance. All other data sourced from Finviz.
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