Easy Ways to Make Money

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The title sounds like a scam, right? There are no easy ways to make money. There are, however, some ways that are easier than others.

One way to make money on stocks is to invest in high-growth companies. Growing companies typically have the fastest-growing sales -- and you can easily identify growing sales by using a screening tool like the one found on Yahoo! Finance. Easy enough.

But easy doesn't cut it
Screening for companies with the most revenue growth over the past year gives us these candidates (among others):

Company	Market Cap*	One-Year Growth in Total Revenues**
Wynn Resorts (Nasdaq: WYNN)	$5,369.3	125,613.6%
First Avenue Networks (Nasdaq: FRNS)	$302.3	917.0%
Petrohawk Energy (Nasdaq: HAWK)	$1,049.4	831.5%
U.S. Energy (Nasdaq: USEG)	$87.1	624.5%
Geron (Nasdaq: GERN)	$563.9	559.9%
NutriSystem (Nasdaq: NTRI)	$1,270.3	339.4%
Sirius Satellite Radio (Nasdaq: SIRI)	$8,681.2	302.4%

*In millions. **Trailing 12 months.
Data provided by Capital IQ, a division of Standard and Poor's.

Besides showing some remarkable growth rates, the table also shows what's wrong with screening: It's mechanical. Wynn Resorts, for example, just opened its Wynn Las Vegas casino in April 2005, so of course the revenue growth is enormous -- there was barely any business before the grand opening!

What about First Avenue? In addition to sales growth, the company has decreasing profits, decreasing margins, and decreasing free cash flow.

Petrohawk is drowning in its own debt and also had to account for losses on derivative contracts, which drained away all the past 12 months' revenues. These don't show up in the screen at all, but neither does the valuable fact that the company has been able to grow its reserves aggressively.

And that's just what you find on a surface scan of these financial statements.

As far as U.S. Energy and Geron are concerned, this screen doesn't reflect the cyclicality of their businesses. Energy prices and drug pipelines are both volatile factors, so looking back over a one-year time horizon wouldn't give you an accurate measure of the underlying businesses.

Screening isn't the whole shebang
Not all of these skyrocketing sales are invalid, however. Sirius has been on a winning streak since it signed deals with the NFL and Howard Stern -- driving subscribers in droves. NutriSystem has been able to effectively capitalize on current health trends by selling fitness products and weight-management services. It has gone from a penny stock to a highflier in less than a year.

But on its own, screening isn't the most efficient or most accurate way to find great investments. Sirius, although growing rapidly, is still unprofitable. And even though NutriSystem would have made a great growth investment back in 2005, a screen won't tell you how much value is left in the stock. While you can screen out companies with high debt or no profits, numbers can still be all over the place -- and because they're easy for companies to manipulate, they never tell the whole story.

The Foolish bottom line
The key is to dig deeper and combine quantitative data with qualitative knowledge -- like quality of management, competitive advantage, and sustainability of the business. Only by doing so will you find out whether those screened numbers are realistic.

If you'd like a pre-approved list of realistic and growing candidates, you can check out The Motley Fool's Stocks 2006 report. You'll get 12 of our analysts' best recommendations for the year ahead, all of which come with their own qualitative and quantitative due diligence and digging. Click here to learn more. What could be easier?

Shruti Basavaraj is a Motley Fool research analyst, and she thinks the easiest way to make money is to get nice presents (hint, hint). She does not own shares of any company mentioned. This message is brought to you by the Fool's disclosure policy.