Are you really a growth investor?

It's worth asking. Even though talk of a growth-stock rally has spread to the pages of The Wall Street Journal, investing in fast movers can be a stomach churning-experience.

Think of Visual Sciences (NASDAQ:VSCN), a Web analytics firm that suffered a greater than 10% loss yesterday on no news whatsoever.

Surprised? Don't be. Market panics occur daily. That's why all-star investors bet on growth over the very long term. They know that:

How we do it
Of course, not all growth stocks will do. Our weekly hunt is for the next great multibagger. But unlike David Gardner and his team at Motley Fool Rule Breakers, who scour everything from financial statements to trade magazines to clinical reports in their research, we're going to rely on our Motley Fool CAPS investor-intelligence database.

Specifically, we're looking for stocks that have earned a five-star rating in CAPS and are expected to grow their earnings by at least 20% annually over the next five years. Five-star stocks are those that the community, on the whole, believes will outperform the S&P 500.

Let's have the list
Now, with that preamble behind us, here are five more top growth stocks.


No. of CAPS Ratings

Bullish CAPS Ratings

5-Year Growth Estimate

Shengda Tech (NASDAQ:SDTH)




Meridian Bioscience (NASDAQ:VIVO)








ClickSoftware Technologies (NASDAQ:CKSW)




AeroVironment (NASDAQ:AVAV)




Source: Motley Fool CAPS, Yahoo! Finance.

Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research. But, of these five, I can say that Chinese chemist Shengda interests me the most.

I'm struck by the financials and the valuation. First, the financials. Return on capital has remained above 25% since 2004. Return on equity, meanwhile, hovers near 40%. Very few companies -- let alone a staid chemical firm -- ever attain those heights.

Next, the valuation. Capital IQ (a division of Standard & Poor's) has Shengda trading for 12.4 times current year estimates, for a microscopic PEG ratio of 0.30. That's hardly a perfect indicator, but it at least suggests that Shengda's stock has plenty of room to run.

Of course, every company has its good years, so how can we know that Shengda is a sustainable business? CAPS All-Star jahbu offers this thesis:

Has one business that has good cash flow and allows expansion of their other high-growth business.

Coal-based chemical business: ammonium bicarbonate for fertilizer, liquid ammonia for refrigerants and pesticides, methanol for formaldehyde and fuel, and melamine for adhesives. Low growth but steady income.

Growth comes from limestone -- nano precipitated calcium carbonate. Used in rubber, plastics, coatings, paper, paint, and possibly many more things in the future. ... Sounds like they have a patent pending on their techniques and a strong R&D team. Also they have economy of scale by having a limestone quarry close, which reduces production costs and helps create higher margins.

Intrigued? Do your own due diligence, and then check in with thousands of other investors at CAPS. And, if you'd like, add your own commentary. You'll be helping your fellow Fools and testing your ideas at the same time. Get started now; the service is 100% free.

See you back here next week for five more top growth stocks.

Fool contributor Tim Beyers, who is ranked 8,861 out of more than 65,000 participants in CAPS, is a regular contributor to and Rule Breakers. Tim didn't own shares in any of the stocks mentioned in this article at the time of publication. Find Tim's portfolio here and his latest blog commentary here. The Motley Fool's disclosure policy is your portfolio's competitive advantage.