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 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.
|
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 |
|---|---|---|---|---|---|
|
Almost Family (NASDAQ:AFAM) |
51% |
52% |
28% |
55% |
***** |
|
Apple (NASDAQ:AAPL) |
24% |
41% |
50% |
41% |
*** |
|
Baidu.com (NASDAQ:BIDU) |
81% |
89% |
86% |
91% |
** |
|
Intuitive Surgical (NASDAQ:ISRG) |
43% |
27% |
36% |
41% |
**** |
|
Visa (NYSE:V) |
33% |
75% |
34% |
25% |
*** |
Source: Capital IQ (a division of Standard & Poor's) and 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. So let's take a look at the operations of one of these companies and check whether it's held in high esteem by investors, considering they appear to be sales and profits machines.
Tippling at the speakeasy
For the eighth straight quarter, home-health-care provider Almost Family beat analyst expectations, reporting a 31% increase in profit, or $0.73 per share, on a 31% run-up in revenue, to $76.3 million. Analysts had been expecting Almost Family to earn $0.70 on almost $74 million in revenue.
The care provider has been on a buying binge over the past year, and there's no indication it's going to stop. With some $10 million in cash, Almost Family has said it may be on the prowl again. While acquisitions have fueled much of the sales growth the company has enjoyed, organic growth hasn't been too shabby either, accounting for 58% of total sales growth in the latest quarter. So where a large number of acquisitions might normally be a concern, Almost Family seems to be integrating them nicely. It's something for investors to keep an eye on though.
The health-care debate in Washington remains a looming concern, though not for management, which says it's positioning the company to thrive no matter which way the debate goes. Investors also are generally confident that Almost Family can overcome hurdles. Some 96% of the more than 650 CAPS members rating the health-care provider believe it will outperform the broader market averages; it gets a top five-star rating.
Members like All-Star Learned, who ranks higher than 96% of all CAPS members, says fears about legislation are already priced in:
I believe the uncertainty over healthcare is largely baked into the current prices. I think we will see a decline in growth rates if [Obamacare] comes to pass, but we still have a significantly aging population, and Home care is cheaper than institutional.
Perhaps it's just me being late to the game, but I'm going to Almost Family's CAPS page and marking it to outperform the market as well. The Motley Fool Hidden Gems recommendation has more than doubled in value since its low point back in March, and now trades at around 12 times trailing earnings. Yet it also trades at a similar valuation on next year's earnings, even though analysts expect an average of 18% earnings growth over the next half-decade.
While that growth positions the company similarly to Amedisys (NASDAQ:AMED) and a bit above Gentiva Health Services (NASDAQ:GTIV), when you add Almost Family's stronger balance sheet to the mix, it seems to be in the pink of health and should be more nimble to take advantage of opportunities.
No Great Depression
How about you? Would you buy Almost Family at today's prices? Let us know in the comments section below.
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.
