Growth stocks are the beauties of the stock world, plain and simple. They're exciting, they have good stories, and they can make you a lot of money.
But for all their beauty, growth stocks are also the prima donnas of the market. They can be erratic, they don't always live up to their billing, and they tend to attract a shareholder base that's ready and willing to run at the first signs of slowdown. For those reasons, caution is certainly in order when you enter the world of growth investing.
Fortunately, The Motley Fool's CAPS service brings us the collective intelligence of a community of more than 140,000 investors and is a great resource for separating the Jessica Albas from the Jabba the Hutts. Each of the stocks competing for this week's top spot has a market cap of at least $100 million and grew its net profit per share by an average of 15% or more per year over the past three years. (You can run the screen for yourself to get full results.)
Let's go ahead and meet our contestants.
Green Mountain Coffee Roasters
It may not be one of the big names in the coffee world yet, but Green Mountain Coffee Roasters
The company's June-ended quarter showed 61% year-over-year revenue growth, so it doesn't seem like this caffeinated company is slowing down quite yet.
GameStop
If we take anything from the lackluster earnings of some of the folks in the video gaming world, it would likely be that the industry is still facing some pretty tough headwinds. That opinion would only be strengthened by the Goldman Sachs
But with hot new games like Call of Duty: Modern Warfare 2 and Viacom's
Though the past year's results haven't been anything to pump your fist about, GameStop has more than doubled its earnings per share since its 2007 fiscal year.
Dolby
Now what would the sound and fury of video games -- or really most other electronic entertainment -- be without the sound? Audio kingpin Dolby
It's hard to expect that an appreciation for high-quality sound will fade in our ever-more-digital world, and so it's likewise hard to doubt that Dolby will turn the volume right back up on its growth.
Chipotle Mexican Grill
I'm not sure there's a good metaphor comparing Chipotle's
Shares may have looked pricey to some investors after the latest quarter, but the company showed that it knows how to grow right through a recession.
eBay
With a $31 billion valuation, it's hard to think of eBay
A repeat of the 84% growth the company delivered since 2005 may not be in the cards, but with a forward price-to-earnings ratio of less than 15, investors may not need that to see a good return.
The envelope please ...
The voting is in and CAPS community members have shared their opinions. With a bottom-of-the-barrel one-star rating, Green Mountain Coffee Roasters is the first stock to get voted off the island. It seems the 60-plus P/E ratio was a little too high for CAPS members' tastes.
Chipotle and eBay both fared a bit better, but with three stars each, neither stock will have a shot at the top spot for this week.
With a solid four-star rating, CAPS members seem to think GameStop should at least be on your watch list. The industry may have some question marks, but the stock's trailing P/E of just over 10 no doubt gives investors a good amount of comfort.
And that leaves us with the top growth stock for the week: Dolby. To get a take on why Dolby is a growth stock par excellence, let's take a look at what CAPS All-Star wuff3t had to say last month:
Decades as the leaders in the field and still no-one looks like unseating them. As long as they can take advantage of changing technologies by persuading others to use Dolby products (which shouldn't be too difficult for them given their unparalleled reputation for excellence) they can continue to reap profits for years to come.
Now go vote!
Do you think that Dolby has what it takes to be America's next top growth stock? Head over to CAPS and let the rest of the community know what you think.
Related Foolishness:
Do you have a good guacamole metaphor? Please, share it with the class in the comments section below.