7 Stocks With a Bright Future

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Investments that have been successful over the long term almost assuredly share at least one thing in common -- growth. You'll be able to find very few companies that have been unable to increase their earnings, yet still have produced good returns for shareholders.

Think about it this way: Dividends aside, investors reap their gains when a company's stock price goes up. The stock price is typically driven by two levers, earnings and the multiple that investors are willing to pay for those earnings. Since earnings multiples tend to fluctuate within a certain range, long-term investors should have a keen focus on the company's ability to increase earnings.

Does it seem too simple? Maybe keeping it simple is a good plan sometimes. After all, as Third Avenue's Marty Whitman has put it:

Based on my own personal experience -- both as an investor in recent years and an expert witness in years past -- rarely do more than three or four variables really count. Everything else is noise.

With that in mind, I've kept it simple and dug up seven stocks that analysts expect will notch long-term earnings growth of 10% or better. I've also pulled up the CAPS rating for each stock to show what the 140,000-member Motley Fool's CAPS community thinks of its prospects.

Company	Expected growth	Forward P/E	CAPS rating (out of 5)
Blue Nile (Nasdaq: NILE)	21%	53	*
GigaMedia (Nasdaq: GIGM)	20%	9	*****
Charles Schwab (Nasdaq: SCHW)	19%	23	****
Yahoo! (Nasdaq: YHOO)	18%	36	**
Costco Wholesale (Nasdaq: COST)	13%	21	****
Dynamic Materials (Nasdaq: BOOM)	13%	25	*****
Hewlett-Packard (NYSE: HPQ)	12%	12	***

Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS.
P/E = price-to-earnings ratio.

Wall Street analysts aren't known for being supernatural in their forecasting skills, so not all of these estimates may pan out. However, this list may be a good place to dig in for further research. I'll get you started with some thoughts on a couple of these stocks.

Cool to the touch?
The expected growth rate indicates that analysts have high hopes for online diamond and jewelry retailer Blue Nile. Frankly, this boggles my mind a bit considering that the company hasn't done a whole heck of a lot for its bottom line in the years it's been a public company.

Sure, if we use 2002 as a starting point we could say that the operating income over the past 12 months was quadruple what it was seven years ago. However, that profit number is basically the same as what the company produced in 2006 and is down about 9% from the 2005 level.

CAPS members seem to be particularly nonplussed about the valuation that the market has given Blue Nile's shares. All-Star kurtdabear weighed in late last month with a thumbs-down:

The next few years will not be a good time to be invested in a purveyor of high-priced, non-necessary, consumer products. NILE has had a nice run up; now it's time to get out or to short it on its descent.

Bringing the heat
But what about high growth and a high rating from the CAPS community? For that we can turn to Dynamic Materials.

Dynamic Materials certainly lives up to its "BOOM" ticker. The company's primary business is "explosive metalworking," which means that it uses explosives to combine two metals. Typically this means combining a thin layer of expensive, corrosion-resistant metal with a less expensive material like steel.

It may seem funny to talk about growth for a company that just reported quarterly profit that fell 85% from the prior year. What investors need to keep in mind, though, is that we're talking about a company that serves highly cyclical markets and should show some, well, explosive growth in the face of global economic recovery.

CAPS member HasOrHasNot jumped into the bullish mix on Dynamic back in September:

Industry-leading technology, no competitors, and rich market demand, all on top of an extremely cool ticker symbol!

But what do you think?
Do these stocks have what it takes to post solid growth in this economy? Or have analysts been too optimistic? More than140,000 members of the free CAPS community are sharing their opinions on thousands of stocks. Head over and let the community know what you think of Blue Nile, Dynamic Materials, or any of the other stocks listed above.

Apple is certainly a company that falls under the "growth" heading, but fellow Fool Rich Greifner thinks that there's good reason to avoid this iPod slinger.