5 More Top Growth Stocks

Are you really a growth investor?

It's worth asking. Fast-moving tech stocks have taken a beating recently, leading to a slew of bargains for those with the guts to buy.

No surprises there. Market panics occur daily. Just ask investors who hold shares of rocket stock Bio-Imaging Technologies (Nasdaq: BITI  ) , which yesterday fell more than 7% on no news whatsoever.

That's why all-star investors bet on growth over the very long term. They know that:

  1. Businesses that make investors billions always begin as growth stocks.
  2. The best of them feature massive and identifiable competitive advantages.
  3. Growth as a strategy has the capacity to deliver 20% or greater annual returns for decades at a time.

How we do it
Of course, not all growth stocks will do. Our weekly hunt is for the next great multibagger. But unlike David Gardner and his team at Motley Fool Rule Breakers, who scour everything from financial statements to trade magazines to clinical reports in their research, we're going to rely on our Motley Fool CAPS investor-intelligence database.

Specifically, we're looking for stocks that have earned a five-star rating in CAPS and which are expected to grow their earnings by at least 20% annually over the next five years. Five-star stocks are those that the community, on the whole, believes will outperform the S&P 500.

Let's have the list
Now, with that preamble behind us, here are five more top growth stocks:

Company

No. of CAPS Ratings

Bullish CAPS Ratings

5-Year Growth Estimate

Mindray Medical (NYSE:MR)

837

821

36.4%

Bucyrus Int'l (NASDAQ:BUCY)

176

172

30%

51job (NASDAQ:JOBS)

200

197

27.7%

Cerner (NASDAQ:CERN)

134

128

24.1%

Vimpel Communications (NYSE:VIP)

641

629

23.4%

Sources: Motley Fool CAPS, Yahoo! Finance.

Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research.

At first, I was tempted to go with Chinese medical device maker Mindray Medical, which has been one of David Gardner's better-performing picks for Motley Fool Rule Breakers. Yet Mindray may still be no more than fairly valued if you believe analysts, whose five-year projections give the stock a reasonable 1.32 PEG ratio.

What a resume!
But I'm most intrigued by another Chinese stock: 51job, which is one of the more popular publishers of employment classifieds in several provinces.

It's also a good growth story, as Foolish colleague Rick Munarriz points out here. Listings were up 37% in the latest quarter. Revenue was up 22%. But what I like most is 51job's generous free cash flow.

Actually, to be fair, I'm guessing about that -- since 51job didn't publish a cash flow statement. But the balance sheet sure looks good. Total cash and investments (denominated in Chinese renminbi) were up 14.6% through the first nine months of the year. Diluted shares outstanding barely budged over the same period, which strongly suggests that 51job is converting much of its revenue into cold, hard moola.

My only concern is that returns on capital, though rising, remain stuck in the single digits. Capital-light business models like this often sport double-digit ROC, as seen with U.S. peer Monster Worldwide (Nasdaq: MNST  ) .

But that can and should change, since this is a fast-growing business in an important market. Here's how fellow Fool Mike Kasprzyk, known in these digital parts as TMFHoosier8, put it recently:

The company claims to be the leading recruiting company in China as observed by its large database and the high volume of page views. Either way they have a lot of potential in a growing Chinese market. As an added bonus, CEO Rick Yan owns 57% of shares outstanding, often a good sign. (Emphasis added.)

I'll say. Between its growth potential, excellent free cash flow, and committed management team, I'm inclined to add 51job to my CAPS watch list.

But that's me. What about you? What would you do? Let us know by signing up for CAPS today. It's 100% free to participate.

See you back here next week for five more top growth stocks.


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