5 Stocks With a Bright Future

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 and 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 five 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 130,000-member Motley Fool CAPS community thinks of the companies' prospects.

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 even get you started with some thoughts on Starbucks.

Feeding the growth
It should surprise no one that the primary driver of Starbucks' growth has been new Starbucks locations. After all, it seems like no matter where you go in the U.S., you're rarely more than a stone's throw away from a hot cup of Starbucks coffee, right?

In fact, in one of my favorite Lewis Black moments, he illustrates just how many Starbucks there are:

... and if you walk to the end of the block, there sits a Starbucks. And directly across the street -- in the exact same building as that Starbucks -- there is ... another Starbucks. There is a Starbucks across the street from a Starbucks! And ladies and gentlemen, THAT is the end of the universe.

So what happens now? Does the company just stop dead in its tracks? Given the long, deep decline of its stock -- not to mention the company's stated goal of slowing U.S. store growth and closing underperforming stores -- some investors may come to that conclusion.

I'm not so sure though. First of all, getting more disciplined about store count may hurt overall volume, but axing underperforming stores can improve profitability across the board by reducing costs. At the same time, while the 7,000-plus stores in the U.S. may make rapid growth in its home country challenging, the company has fewer than 2,000 stores throughout the rest of the world. And with a footprint already established in Canada, the UK, China, and Germany, among others, it would seem there is a lot of potential growth to be had.

Calling all bulls
Let's face it, Starbucks isn't a favored stock on CAPS. With more than 1,600 thumbs-down on the stock, against its 5,700 outperform ratings, it's been stuck with a lowly two-star rating. Many CAPS members seem to believe that the company doesn't have much of a competitive moat and is currently being outflanked by competitors like McDonald's (NYSE:MCD).

But plenty of CAPS members have taken the other side of the debate. CAPS All-Star MJKpayday, for example, countered the bears last month with this:

Starbucks, who was once a growth darling of the 90s, has reached that "cash cow" stage of life, but only problem is the cash has not been all that spectacular as of late. The real reason for this pick is two fold: 1.) I believe management and new CEO will improve operations store by store 2.) Starbucks has been working on and now has an instant coffee version of the real deal which could mean a major slice of a multi-billion dollar business.. Could this cash cow go darling again on us?

On pretty much any day of the week I prefer a cup of Dunkin' Donuts coffee over Starbucks', but I realize that my preference doesn't extend to everyone else. In fact, there are enough people around the world who recognize and favor the Starbucks siren that the brand was on Interbrand's 2008 list of the best global brands. And though it's nowhere near the iconic status of McDonald's golden arches, it's not too far behind Yum! Brands' (NYSE:YUM) Pizza Hut.

My take is that Starbucks' efforts to turn torrid growth to disciplined growth in the U.S., along with its opportunities in the rest of the world, will help the stock climb out of the doldrums, and get back to its market-beating ways.

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 than 130,000 members of the free CAPS community are sharing their opinions on thousands of stocks. Head over to CAPS and let the community know what you think of Starbucks or any of the other stocks listed above.

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