7 Stocks With Growth on the Menu

If I asked you to cook up the ideal company, what would you say? No, no, 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 market dish, but I would guess that there is at least one ingredient that 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 and lacks avenues for expansion?

Turning back to reality, I have dug up a handful of companies that actually exist and are expected to post significant growth in the years to come. These companies may not all be the picture of perfection, but I've also consulted the 140,000 members of The Motley Fool's CAPS community to get an idea of which are our best bets.

Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS. NM = not meaningful. TTM = trailing 12 months.

While these aren't meant to be formal recommendations, they could be a great place to kick off further research. In fact, let's dig in a bit further on PetMed Express.

Fueling the growth
Gone are the days when Fido was relegated to the backyard and treated like, well, an animal. Pet owners increasingly see their pets as a part of the family, and in many cases are as concerned about the well-being of their dog or cat as they would be about a child. I should know; I'm the owner of a very spoiled dog.

Pet product manufacturers have seen the massive opportunity to give pet owners everything they could dream of to outfit their pets and keep them in tip-top shape. On one side of the equation are gear manufacturers like Ruff Wear, which make kitschy products like doggy hiking boots, while on the other side are companies like PetMed Express, which are cashing in on pet medications and supplements.

A quick look at PetMed's numbers shows exactly how profitable this business can be. Between fiscal year 2005 and fiscal year 2009, the company doubled its revenue. Profit margins expanded significantly over that same period, allowing net income to post an even more impressive jump of nearly 190%. The company is also massively cash flow positive and has an enviable balance sheet that doesn't show a lick of debt.

As for the growth ahead, recessionary conditions may take some of the pep out of pet owners' urge to spend, but I don't have trouble believing the 16% annual growth rate that Wall Street analysts have come up with.

Perfection or poser?
Nearly 650 outperform ratings on CAPS, against just 16 underperform ratings, have landed PetMed with a perfect five-star rating. CAPS All-Star Babachrono joined the chorus back in April with a bullish, if somewhat cautious, take on PetMed:

Increasing revenues, people spend lots of money on pets, heck some pets are better taken care of than kids, always plenty of room for discount medication sellers compared to the rip off prices from your vet. I do echo the concern that their explosive growth has to come to an end soon, and is probably not far off. Huge amount of cash to no debt is great! I would like to see what they plan to do with some of that cash as the economy stabilizes, little dividend or stock buy back would be nice. ... I'm long PETS but will be watching for what their next move will be.

I've already given PetMed's stock a thumbs-up in my CAPS portfolio. Now I want to know what you think. Share 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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