If I asked you to cook up the ideal company, what would you say? 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'd guess that there's at least one ingredient 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 without avenues for expansion?
I've dug up a handful of real-world companies that are expected to post significant growth in the years to come. They may not all be the picture of perfection, so I've also consulted the 135,000 members of the Motley Fool's CAPS community to see which might be our best bets in the group.
|
Company |
Expected long-term growth |
TTM Price-to-earnings ratio |
CAPS rating (Out of 5) |
|---|---|---|---|
|
Visa (NYSE:V) |
19% |
35 |
*** |
|
VeriFone Holdings (NYSE:PAY) |
18% |
N/A |
*** |
|
Assured Guaranty (NYSE:AGO) |
16% |
N/A |
* |
|
Agilent Technologies (NYSE:A) |
12% |
25 |
*** |
|
Schering-Plough (NYSE:SGP) |
11% |
18 |
**** |
|
Murphy Oil (NYSE:MUR) |
11% |
11 |
***** |
|
Colgate-Palmolive (NYSE:CL) |
10% |
18 |
**** |
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. Let's dig in a bit further on Murphy Oil.
Fueling the growth
If you've taken a gander at Murphy Oil's recent results, you might be scratching your head, wondering whether "growth" is the word we should be using here. Murphy's second-quarter revenue fell 45%, while net income plummeted 74%. For those who follow commodity prices, the primary reason for this drop should be obvious -- the realized sales price for Murphy's oil sales in the U.S. fell 53%, while natural gas prices dropped 70%.
But investors tend to concern themselves more with what will happen in the future -- and from that perspective, Murphy looks much more attractive. The company has both upstream and downstream operations, and it conducts its exploration activities around the world. Even as the price of oil has declined, Murphy has continued its exploration efforts and grown its production output -- positioning itself well for a further rebound, or even just a stabilization, in the price of oil and gas.
Perfection or poser?
Murphy has gained quite a positive following on CAPS, with 439 of the 451 ratings on the stock singing its praises. This ratio of outperform to underperform ratings has landed Murphy's stock a perfect five-star rating.
But why are CAPS members so hot on this stock? For that, let's take a look at what CAPS All-Star stan8331 had to say back in April:
Low P/E, manageable debt, good dividend growth, strong track record. I'm over-allocated toward oil & gas, but prices will be heading back up at some point and Murphy seems very well positioned in the meantime.
I've already given Murphy Oil's stock a thumbs-up in my CAPS portfolio, so now I want to know what you think. Post your thoughts in the comments section below, or better still, head over to CAPS and share your opinion with the entire CAPS community.
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