5 Stocks Geared for Growth

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 145,000-plus members think have the best chances of beating the market over the long haul.

Source: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

There's no guarantee that analyst predictions of a company's fantastic growth opportunities will become reality. But their preferred picks do offer an excellent starting place for your own research into extreme buying opportunities. So let's see why the operations of one of these companies may or may not be held in high esteem by investors.

Tippling at the speakeasy
It's enough to make Juan Valdez shed a happy tear. The bidding war between Green Mountain Coffee Roasters and Peet's Coffee (NASDAQ:PEET) over Diedrich Coffee (NASDAQ:DDRX) -- the maker of single-serve coffee pods -- has now reached $32.50 a share, after Peet's upped the ante. Not bad for Diedrich Coffee shareholders, whose shares weren't worth more than a pile of used coffee grounds earlier this year when they were trading hands at just $0.21 each.

If Green Mountain ultimately wins the K-Cup championship -- and last week Diedrich said the bid was superior because it was all cash -- one analyst estimates the coffee roaster will control 85% of pod sales for the Keurig machine. Someone call the antitrust regulators, stat!

When I vacation in Vermont, Green Mountain Coffee is my preferred brew, but admittedly I've never understood the popularity of the K-Cup phenomenon, particularly during this recession. According to the International Coffee Organization, the composite price of coffee is up more than 12% since my idea that Green Mountain's stock was day-old joe first percolated, while the coffee maker's shares are up more than 68%. Coffee prices, though, will continue to rise as production keeps falling, and that's going to make the pricey K-Cups pricier still.

Green Mountain is working to consolidate the single-serve market into one pot, having acquired another smaller licensee just last month. CAPS member tortillatree otherwise finds the coffee brewer to be a good company, but feels it's poised to burn itself if it buys Diedrich:

Solid company, but they're making a big mistake with their bid for Deidrich. They're overpaying, and they're buying a technology they already own, so they're pretty much paying for nothing. Deidrich also makes the "cadillac" of coffee roasters, and that's cool....but right now no one is buying cadillacs. In fact, if you look on craigslist, you can pick up barely used coffee roasters for a fraction of their retail price. Independent coffee shops and roasteries are going out of business right and left. So...GMCR is gonna be hurting if they end up winning this bid. And if they don't win the bid, their stock price falls...not as much...but back down into the 40's-50's range where they were before this craziness all began. It's a lose-lose for them right now.

Remembering that I've been wrong about Green Mountain before, I find myself in agreement with tortillatree. At 45 times trailing earnings, the stock's not cheap and it will be using up much of its cash balance to make this purchase. And that cash was available only by diluting current shareholders by issuing almost 6 million new shares. I foresee further dilution if this acquisition goes through.

That means I'm not pouring myself a cup here. Instead, I'll head over to Green Mountain's CAPS page and rate it to underperform the broader market averages. Join me there to share your views, or use the comments section below to tell me my thesis is nothing more than a cup of swill.

No Great Depression
It pays to start your own stock research 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 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?