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 with rising revenues and profits -- 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.
Below are a handful of companies that have enjoyed 15% or more annual growth in sales and earnings over the past three years, and for which analysts forecast total growth of 15% 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 145,000-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) |
|---|---|---|---|---|---|
|
Illumina (NASDAQ:ILMN) |
64% |
42% |
33% |
19% |
**** |
|
Netease.com (NASDAQ:NTES) |
17% |
19% |
24% |
34% |
*** |
|
Netflix (NASDAQ:NFLX) |
15.92% |
19% |
25% |
23% |
*** |
|
Teva Pharmaceutical (NASDAQ:TEVA) |
20% |
28% |
26% |
20% |
***** |
|
Trina Solar (NYSE:TSL) |
101% |
22% |
22% |
15% |
** |
Sources: Capital IQ, 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 they appear to be sales and profits machines.
Grinding down the competition
For the diehard movie fan, Netflix’s "sellout" to Time Warner (NYSE:TWX) might leave a lot of customer goodwill on the cutting-room floor. For the rest of us, who are willing to wait awhile for a cheaper rental, the agreement may prove to be an Academy Award-worthy performance.
Netflix agreed to wait 28 days before making newly released movies from Time Warner available through its mail rental service. By doing so, it gets a big discount on the price it ultimately pays for the films -- as well as access to the studio's storehouse of movies, which it can make available for Internet streaming. My Foolish colleague Anders Bylund has it right on this one: This is no tearjerker. Netflix should win the Best Actor award.
Blockbuster (NYSE:BBI) partisans naturally contend their company's model is the best of all worlds. It offers mail rental service like Netflix, but also has "street date" releases because it pays a portion of its rental fees to the studios. It's also getting into the kiosk business like Redbox. Unfortunately for Blockbuster, though, the bricks-and-mortar setup has created a significant drag on performance, and it teeters at the edge of the financial abyss.
Investors remain generally enthused by the potential Netflix offers, though. CAPS member jlmorinfl finds the movie rental leader to be an exceptional value proposition overall, particularly in this economy:
This company has a loyal and growing customer base. It's service/product stands out and attracts other "wannabes" such as Blockbuster. Additionally, the economy has driven much of the entertainment dollar back behind the front door of many homes. Quality entertainment for a quality price. That's a recipe for success.
More than 7,200 CAPS members have previewed Netflix, with 84% rating it to outperform the markets. Head over to the Netflix CAPS page and take your turn reviewing this movie maven.
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. 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!
