7 Stocks With Growth on the Menu

If I asked you to cook up the ideal company, what would you say? No, no, I'm not asking you to tick off your favorite members of the Fortune 500 or some up-and-comer small cap that you've just found. I want you to think about the ingredients you'd give a company if you could dream it right into existence.

Would it be in a particular industry? Would it be services- or product-based? Would it have fat profit margins or would it make its money by doing a huge volume?

We could spend all day going over the details of this magnifique stock market dish, but I would guess that there is at least one ingredient that we'd all add liberally to our creation -- growth. All those other details are great, but how interesting can a business be if it's stagnating and lacks avenues for expansion?

Turning back to reality, I have dug up a handful of companies that actually exist and are expected to post significant growth in the years to come. These companies may not all be the picture of perfection, but I've also consulted the 140,000-member Motley Fool CAPS community to get an idea of which are our best bets.

Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS.

While these aren't meant to be formal recommendations, they could be a great place to kick off further research. In fact, let's dig in a bit further on Portfolio Recovery Associates.

What makes Portfolio Recovery so tasty?
I would think that the 15% long-term growth that analysts are estimating would be right at the top of the list. But let's be honest here; 15% is no small hurdle, so a little skepticism may be in order when we consider whether Portfolio Recovery can really pull it off.

The biggest knock we can put on the company is its recent results. For obvious reasons, the financial crisis and recession have made collecting on defaulted debt a bit more challenging. For 2008, Portfolio Recovery saw its earnings per share drop by 3%, while the first nine months of this year have shown a 9% dip.

But as my fellow Fool Morgan Housel pointed out in his coverage of Portfolio Recovery's earnings report, patience is a virtue, particularly when we're looking at Portfolio Recovery's business. Its rocket fuel is defaulted debt that credit providers are looking to unload at a discount. Fortunately for the company, there is a more-than-ample supply of such distressed debt.

The issue, though, is that the time horizon for collections is typically 10 years, meaning that while opportunity is created today, it might not be realized until far down the road.

Of course, if we can use the past as any indicator of what the company can deliver in the future, then 15% growth isn't just idle speculation. Between 2000 and 2008, Portfolio Recovery's average annual earnings-per-share growth exceeded 45%. That amazing growth was driven in part by some spectacular years early this decade when the company was able to buy debt that's returned 400% or more in collections.

Could Portfolio Recovery be preparing for a repeat of those impressive years with the debt it's buying today? It certainly seems possible.

Perfection or poser?
While I would shy away from calling any stock perfect, Portfolio Recovery and its promise of future collection riches gets as close to perfect as a stock can get in the CAPS community: 5 stars.

Back in July, CAPS All-Star HARTLESS63 became one of the 3,200 Portfolio Recovery bulls and said:

I'm betting that my neighbors will be defaulting on loans, this will create increased opportunities and revenues for Portfolio Recovery Assoc. who collect on debt that others have written off.

I've already given Portfolio Recovery's stock a thumbs-up in my CAPS portfolio; now I want to know what you think. Share your thoughts in the comments section below or, better still, head over to CAPS and share your opinion with the entire community.

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