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 whose revenues and profits are rising -- 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.
The roaring 20s
Below are a handful of companies that have enjoyed 20% or more annual growth in sales and earnings over the past three years, and for which analysts forecast total growth of 20% or more over the next two years. We'll pair up those predictions with the community stock research at Motley Fool CAPS, to get an idea of which companies its 135,000-plus members think have the best chances to beat 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 five) |
|---|---|---|---|---|---|
|
Celgene |
58% |
85% |
69% |
40% |
**** |
|
DreamWorks Animation |
29% |
43% |
40% |
32% |
**** |
|
FLIR Systems |
29% |
35% |
27% |
26% |
**** |
|
Mindray Medical |
51% |
35% |
37% |
40% |
***** |
|
VistaPrint |
54% |
40% |
61% |
50% |
*** |
Source: 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 what could be extreme buying opportunities.
Ready, set, grow
As its drug Revlimid continues to gain market share for the treatment of multiple myeloma, Celgene seems set to keep cranking out value for investors for a long time to come. Clearly, Revlimid and fellow treatments Thalomid and Vidaza are driving Celgene's business, even as co-pay assistance and free drugs for patients eat into its revenue. Considering that the nonprofits with which Celgene aligns itself to deliver such patient assistance mark their income cutoffs at as much as seven times the poverty level, the company's largesse will be a factor to contend with in the current economic climate, since more people will undoubtedly qualify for aid.
Still, revenue for Revlimid have been strong, thanks to market share gains and increases in the duration for which patients take the drug. When your top-selling drug is able to boost sales an additional 26%, you'll find investors getting interested. But analysts have nonetheless voiced concerns that Celgene will not be able to meet its target of $1.7 billion in sales this year.
Still, the ability of patients to tolerate longer periods of treatment using Revlimid has to be a cause for long-term hope of even greater growth. Europe, where it has been on sale for a year or less, certainly represents significant potential for sales gains, too. Thalomid and Vidaza also have further room to expand their market share, and Celgene's developing new treatments to join them.
But at 16 times forward earnings, Celgene is trading at a premium. Rivals like Amgen
CAPS members like Macsblow think demographics will lead pharmaceutical stocks higher in the future, while top-rated All-Star TSIF leans toward a more bullish argument:
If pharmaceuticals are not going to hold as a hedge then Celgene probably has a lot more to fall as part of the third wave of cyclical hits that took out various sectors in November and others in March. Biotechnology was down 3% today with mostly losers, but I think they are still stong as a whole and Celgene with it's billion dollars in the bank, minimal debt, and good products in production and the development pipeline will find a cure for what the market perceives ails it as will most of the pharaceutical's where the market's risk/reward tolerance is like gamblers in Vegas.
Growing, growing, gone?
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 share your opinions on these or any other stocks that you think deserve a spot on our dance cards.
