Few companies double their earnings in a single year. Those that achieve 100% growth rates for several years running have the potential to earn investors exceptional returns. But since everyone wants to own these stocks, they'll usually cost you an arm and two legs.
Luckily, there is an area in the stock market where the fastest growers are frequently overlooked --because they're too small to attract big Wall Street firms' attention. In anxious markets like these, a small cap on fire can make one outrageously cheap stock.
With that in mind, I used our new CAPS screening tool to pick out some of the fastest-growing small companies. The following 10 companies have averaged 100% annual earnings growth over the past three years.
They also have:
- Price-to-earnings ratios under 40.
- Market capitalizations between $100 million and $2 billion.
- Five-star ratings, the highest possible, from our Motley Fool CAPS community.
Remember, in the first year for which we have data, five-star companies outperformed with an average gain of nearly 28%.
|
Company |
Share Price |
Sector |
Market Cap |
|---|---|---|---|
|
Allis-Chalmers Energy |
$16.37 |
Basic Materials |
$575 million |
|
Bolt Technology |
$18.05 |
Basic Materials |
$155 million |
|
GigaMedia (Nasdaq: GIGM) |
$16.03 |
Technology |
$859 million |
|
Global Industries |
$16.12 |
Basic Materials |
$1.9 billion |
|
Interactive Intelligence (Nasdaq: ININ) |
$12.67 |
Technology |
$227 million |
|
IPG Photonics (Nasdaq: IPGP) |
$16.64 |
Technology |
$734 million |
|
Pioneer Drilling (NYSE: PDC) |
$16.46 |
Basic Materials |
$819 million |
|
Sigma Designs (Nasdaq: SIGM) |
$18.43 |
Technology |
$489 million |
|
T-3 Energy Services (Nasdaq: TTES) |
$54.66 |
Industrial Goods |
$644 million |
|
The9 Limited |
$21.35 |
Services |
$614 million |
Of course, screens are merely a first step in the stock-selection process. Just because a company has a history of doubling earnings doesn't necessarily mean it will continue its high-octane growth, or even that it will make a great investment. Picking the right stocks always requires due diligence.
Come and join us on Motley Fool CAPS to dig into these companies further. Let our 100,000-person-strong (and counting) CAPS community help you identify tomorrow's multibaggers. There's information and opinions on more than 5,600 stocks, and don't forget the screening tool to help you sort information. It's all free.
For more CAPS Foolery:
If you'd like to learn more about small-cap investing, you can click here to take a look at the Motley Fool Hidden Gems picks that have been beating the market by 25 points to date. You can see all of our past recommendations as well as our two newest picks, free for 30 days.
Ilan Moscovitz doesn't own any of the companies mentioned in this article. Sigma Designs, Interactive Intelligence, and IPG Photonics are all Rule Breakers recommendations. GigaMedia is a Global Gains pick. The Motley Fool owns shares of IPG Photonics. The Fool's disclosure policy is on fire.
