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 whose revenues and profits are rising -- 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.
The roaring 20s
Below are a handful of companies that have enjoyed 20% or more annual growth in sales and earnings over the past three years, and for which analysts forecast 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 the 140,000-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 EPS Growth
|
Est. 2-Year Future Revenue Growth
|
CAPS Rating
(out of 5)
|
|
Advanced Battery Technologies
(Nasdaq: ABAT )
|
74%
|
95%
|
94%
|
171%
|
**
|
|
China Automotive Systems
(Nasdaq: CAAS )
|
32%
|
36%
|
43%
|
46%
|
*****
|
|
eHealth
(Nasdaq: EHTH )
|
35%
|
70%
|
21%
|
39%
|
**
|
|
Google
(Nasdaq: GOOG )
|
35%
|
25%
|
35%
|
22%
|
***
|
|
HQ Sustainable Maritime
Industries (NYSE: HQS )
|
27%
|
45%
|
23%
|
46%
|
*****
|
Source: Capita lIQ, 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, considering that they appear to be sales and profits machines.
Tippling at the speakeasy
Where else can you possibly search for stuff? Both Google and Microsoft's (Nasdaq: MSFT ) Bing are available for the increasing number of people who are looking at social media outlets to find information. Both of them will now incorporate results culled from Twitter and Facebook with the goal of being able to follow friends on such sites without having to log onto them so much. It will all be done from within the search results page.
Admittedly, I'm still behind the times, technologically speaking, and only recently started using Facebook with more regularity. Still, I don't "get" Twitter, though some friends find it an indispensible tool for keeping people informed. Maybe I just don't care enough what everyone is doing, or perhaps while I like easily digestible tidbits of information, 140 characters is just a tad too brief even for my tastes.
The latest developments, though, mean that my search results will be cluttered with this dreck, and I'll have to wade through even more meaningless hits to find what I'm looking for. Personally, I'm not seeing this as an advance. Yet it's the willingness of Google to branch out into areas related to its main source of strength that has some investors like CAPS member PetePersona viewing the search king as being an omnipresent force to contend with:
Global domination of Search and Hosted Apps. I also believe that there [are] some significant changes coming down the line that will revolutionize searching on the net. This will be implemented by Google because of their talent pool.
Similarly, Tasm01 looks towards Google's ability to tap into new revenue streams as a key driver for future growth:
Google is expanding its operations into new lucrative areas such as smartphones, mobile and e-book delivery while at the same time generating revenue from its existing services.
I agree that Google has some interesting plans for expanding its offerings. Being able to listen to music streams from search results, or buy a track from iTunes or Amazon.com (Nasdaq: AMZN ) right after searching for what I want to hear is innovative. It will also serve to bolster the business models of those providers as well.
What I'd really like, though, and what neither Google nor Bing provide just yet, is to be able to readily find exactly the information I'm searching for. Think about all those sci-fi movies (heck, the latest episode of CSI even) where the character types in a query and instantaneously gets the data sought. You never see them scrolling through three million hits to find the real nugget of data.
Achieve that, Google (or Bing), and I'll really think you've got something good going on.
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 that you think we should fill up our dance card with?
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