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 then pair up those predictions with the community stock research at Motley Fool CAPS, to get an idea of which companies the 140,000-plus members think have the best chances of beating the market over the long haul.


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

Advanced Battery Technologies (NASDAQ:ABAT)






Gafisa (NYSE:GFA)












Stanley (NYSE:SXE)






Wonder Auto Technology (NASDAQ:WATG)






Source: CapitalIQ, a division of Standard & Poors; 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. Let's see why investors may be less than enamored with these apparent sales and profits machines.

Tippling at the speakeasy
As electric vehicles become a more important component of Advanced Battery Technologies' business model, investors must ask themselves whether its impressive record thus far -- and its forecasted future performance -- can hold up. The company has done well in its segment, manufacturing rechargeable polymer lithium-ion batteries.

Earlier this year, Advanced Battery completed the acquisition Wuxi Angell Autocycle, a maker of various electric transports, including electric bicycles, agricultural vehicles, and SUVs. Wuxi had already been a customer of Advanced Battery, generating nearly 16% of the company's 2008 sales. In 2007, Wuxi sold some 70,000 vehicles, but it offers lower margins than Advanced Battery's main business. The integration might distract management from more immediate pressure from competitors such as CNOOC (NYSE:CEO), which is investing in a lithium-ion battery business.

Considering that 21 million electric bikes were sold in China last year, however, the potential market seems large. In fact, the Chinese bought 90% of e-bikes sold worldwide in 2008, while Southeast Asia and India are expected to embrace the bikes with the same fervor in the near future.

CAPS member MeridianGuy is a "[b]ig fan of Electrical Bikes, especially in China's overpopulated cities." He thinks Advanced Battery is doing a much better job than China BAK Battery (NASDAQ:CBAK) -- a point well noted. At China BAK, revenue has grown at "only" a compounded rate of 22% over the last three years, while profit growth has been hard to come by.

At just $238 million in market cap today, Advanced Battery Technologies trades hands at 11 times its trailing 12-month earnings, far below the S&P 500 average. But given that analysts predict virtually flat annualized five-year growth, Advanced Battery isn't looking so cheap anymore.

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. Why not 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 deserve a spot on our dance card?

CNOOC and HDFC Bank are Motley Fool Global Gains selections.  Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.