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, we can focus on companies whose rising revenue and profits inspire analysts' confidence in continued future growth. And as we do, we should find quite a fertile field of companies that are solid candidates for long-term outperformance.
The roaring 20s
Below are a handful of companies that not only have enjoyed an annual growth in sales and earnings of 20% or more over the past three years, but also have analysts forecasting 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 our 135,000-plus members think have the best chances of beating the market over the long haul.
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Company
|
3-Year Past Revenue Annual Growth %
|
3-Year Past EPS Annual Growth%
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Estimated 2-Year Future EPS Growth
|
Estimated 2-Year Future Revenue Growth
|
CAPS Rating (out of 5)
|
|
Amazon.com (Nasdaq: AMZN )
|
31%
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26%
|
36%
|
38%
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**
|
|
Gilead Sciences (Nasdaq: GILD )
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35%
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32%
|
39%
|
40%
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****
|
|
NetEase.com (Nasdaq: NTES )
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21%
|
22%
|
37%
|
72%
|
****
|
|
Quality Systems (Nasdaq: QSII )
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27%
|
24%
|
48%
|
41%
|
****
|
|
Research in Motions (Nasdaq: RIMM )
|
75%
|
73%
|
35%
|
61%
|
**
|
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
Just because analysts predict great growth opportunities for a company, that doesn't mean the prediction will become reality. But their preferred picks do offer an excellent starting place for your own research into extreme buying opportunities.
Tippling at the speakeasy
Although the swine flu outbreak scared a lot of people, fears of a worldwide pandemic have pretty much subsided in recent weeks. The U.S. government did make available to the states about 25% of its stockpile of Tamiflu (sold by Roche) and Relenza (sold by GlaxoSmithKline (NYSE: GSK ) ), the only two drugs that currently react against the swine flu. So, a possible need to replenish that inventory could end up being a great way for investors to profit from an otherwise terrible situation. That's also a bonus for Gilead Sciences, because it receives royalties from Tamiflu sales.
But Gilead has been facing some strong headwinds, with its share price having fallen19% over the past year. In fact, much of the biotech sector has been rocked, though not to the same extent. The AMEX Biotech index has fallen by 10%, while the SPDR S&P Biotech ETF is off 16% in that same period.
Still, with a pipeline that includes HIV-fighting drugs and associated treatments, Gilead seems unnaturally discounted. Some other industry names, including Biogen Idec (Nasdaq: BIIB ) , seem a bit pricey in comparison -- although Biogen has its own problems.
Yet there are investors who think it's only a matter of time before the market begins to pay up even more for Gilead's market position. Says CAPS member corcione: "The new US administration is committed to increase spending for HIV diagnosis and treatment. Generic drug competition will clearly weigh on pharma, but Gilead's superior market positioning is worth paying for."
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? Let's hear what you have to say about these or any other stocks that you think should fill up our dance card.
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