Seeking Alpha
Recommended for you:
, Portfolio123 (1,636 clicks)
Long only, value, research analyst, dividend investing
Profile| Send Message|
( followers)  

I have searched for very profitable companies with very strong growth prospects. Those stocks would have to show a very low debt and very low PEG ratios. I also looked for companies that are in a short-term uptrend, in a mid-term uptrend and in long-term uptrend. Stocks in an uptrend are performing well and are in a buying mode.

I have elaborated a screening method that shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.

The screen's formula requires all stocks to comply with all the following criteria:

  1. Average annual sales growth for the past five years is greater than 15%.
  2. Average annual earnings growth for the past five years is greater than 15%.
  3. Average annual earnings growth estimates for the next five years is greater than 15%.
  4. Forward P/E is less than 15.
  5. The PEG Ratio is less than 1.00.
  6. Debt to equity is less than 0.30.
  7. Stock price is above 20-day simple moving average (short-term uptrend).
  8. Stock price is above 50-day simple moving average (mid-term uptrend).
  9. Stock price is above 200-day simple moving average (long-term uptrend).

After running this screen on December 31, 2012, before the market open, I obtained as results the six following stocks:

(click images to enlarge)

Green Mountain Coffee Roasters, Inc. (NASDAQ:GMCR)

Green Mountain Coffee Roasters, Inc. engages in the specialty coffee and coffeemaker businesses in the United States and Canada.

Green Mountain has a very low debt (the total debt to equity is only 0.24), and the forward P/E is very low at 13.14. The PEG ratio is also very low at 0.95. GMCR records strong growth on all key parameters. The average annual earnings growth for the past five years was very high at 81.67%, the average annual sales growth for the past five years was also very high at 62.40%, and the average annual earnings growth estimates for the next five years are quite high at 18.58%. The stock price is 1.17% above its 20-day simple moving average, 29.23% above its 50-day simple moving average and 35.68% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrends. On November 27, Green Mountain reported its 4Q fiscal 2012 financial results (here). For the fourth quarter, the company announced revenues of $946.74 million, handily beating analyst estimates for $902.23 million. The company also beat its own guidance of $889.9 million to $925.5 million. That represented approximately 32% growth over the prior year period. However, this quarter featured 14 weeks instead of 13, so if you subtract out the $90 million in extra revenues it reported in that week, growth was approximately 20.35%. On the bottom line, the company reported non-GAAP earnings of $0.64, beating Street estimates of $0.48, and the company's guidance of $0.45 to $0.50. However, that extra week did account for about 7 cents. Last year's fourth quarter earnings per share were $0.47.

All these factors -- the low multiples, the strong growth prospects, the very good 4Q fiscal 2012 financial results and the fact that the stock is in an uptrend -- make GMCR stock quite attractive.

Chart: finviz.com

NETGEAR, Inc. (NASDAQ:NTGR)

NETGEAR, Inc. engages in the design, development, marketing, and sale of networking products.

NETGEAR has no debt at all and the forward P/E is quite low at 14.08. Additionally, the PEG ratio is very low at 0.80. NTGR records strong growth on all key parameters. The average annual earnings growth for the past five years was quite high at 15.14%, the average annual sales growth for the past five years was also quite high at 15.54% and the average annual earnings growth estimates for the next five years are very high at 20%. The stock price is 5.0% above its 20-day simple moving average, 7.79% above its 50-day simple moving average and 8.72% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrends. On October 25, Netgear Inc. reported its 3Q financial results (here), which were in-line on EPS and missed expectations on revenues. On that occasion, Christine Gorjanc, Chief Financial Officer of NETGEAR, said:

Despite the current challenges we are facing in Europe and Australia, we are continuing our increased investment in research and development. This increased investment positions us for the long term success we believe we can achieve in all geographies, especially when the economic environment improves. We expect that the continuous flow of innovative new products from our R&D team will enable us to gain market share worldwide now and in the future. However, facing the current weakened market demand in Europe, we are shifting our sales and marketing resources to the emerging markets where we believe there is growth to achieve and market share to be gained. We will continue to spend wisely and streamline our operations to achieve more efficiency. As always, we are very focused on managing expenses, inventory levels, and cash.

Despite the slightly disappointing 3Q financial results, the low multiples, the strong growth prospects, and the fact that the stock is in an uptrend make NTGR stock quite attractive.

Chart: finviz.com

7 Days Group Holdings Limited (NYSE:SVN)

7 Days Group Holdings Limited, together with its subsidiaries, engages in the operation of hotels under the brand name 7 Days Inn in the Peoples Republic of China.

7 Days Group has very low debt (the total debt to equity is only 0.16), and the forward P/E is very low at 2.47. The PEG ratio is also very low at 0.61. SVN records strong growth on all key parameters. The average annual earnings growth for the past five years was very high at 88.71%, the average annual sales growth for the past five years was also very high at 105.36%, and the average annual earnings growth estimates for the next five years are quite high at 35.11%. The stock price is 2.49% above its 20-day simple moving average, 1.60% above its 50-day simple moving average and 9.80% above its 200-day simple moving average. On November 7, 7 Days Group reported its 3Q financial results (here).

Operating Results:

  • Third quarter 2012 adjusted EBITDA increased 34.2% year-over-year to RMB182.6 million. Third quarter 2012 net income attributable to the Company's ordinary shareholders increased 43.7% year-over-year to RMB63.6 million.
  • Third quarter income from operations increased 69.4% year-over-year to RMB89.6 million.
  • Total transaction value(1), a measure of total room revenue generated from all hotels, reached RMB1,538.9 million, an increase of 45.6% year-over-year.
  • 104 net hotels added in the third quarter 2012 to a total of 1,236 hotels in operation.

All these factors -- the very low multiples, the strong growth prospects and the fact that the stock is in an uptrend -- make SVN stock quite attractive.

Chart: finviz.com

United Therapeutics Corporation (NASDAQ:UTHR)

United Therapeutics Corporation, a biotechnology company, engages in the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases in the United States and internationally.

United Therapeutics has very low debt (the total debt to equity is only 0.26), and it has a very low trailing P/E of 10.73, and a very low forward P/E of 9.48. The PEG ratio is also very low at 0.45. The price to free cash flow for the trailing 12 months is very low at 14.70, and the current ratio is quite high at 3.16. UTHR records strong growth on all key parameters. The average annual earnings growth for the past five years was very high at 19.45%, the average annual sales growth for the past five years was also very high at 36.02% and the average annual earnings growth estimates for the next five years are also very high at 24.07%. The stock price is 0.14% above its 20-day simple moving average, 1.78% above its 50-day simple moving average and 4.08% above its 200-day simple moving average. On November 1, United Therapeutics reported its 3Q financial results (here). United Therapeutics reported third-quarter earnings of $1.46 per share, well above the year-ago earnings of $1.32 and the Wall Street analysts' consensus estimate of $1.25. Higher revenues led to the year-over-year improvement in earnings. Third quarter revenues increased 20.2% to $242.5 million, well above the Wall Street analysts' consensus estimate of $228 million.

All these factors -- the cheap valuation, the strong growth prospects, the very good 3Q financial results and the fact that the stock is in an uptrend -- make UTHR stock quite attractive.

Chart: finviz.com

Virtusa Corp. (NASDAQ:VRTU)

Virtusa Corporation provides information technology consulting, technology implementation, and application outsourcing services in North America, Europe, the Middle East, and Asia.

Virtusa Corporation has no debt at all, and the forward P/E is very low at 12.27. The PEG ratio is also very low at 0.74. VRTU records strong growth on all key parameters. The average annual earnings growth for the past five years was quite high at 17.23%, the average annual sales growth for the past five years was also quite high at 17.38%, and the average annual earnings growth estimates for the next five years are very high at 23.90%. The stock price is 3.70% above its 20-day simple moving average, 1.31% above its 50-day simple moving average and 3.82% above its 200-day simple moving average. Analysts recommend the stock. Among the eight analysts covering the stock, five rate it as a strong buy and three rate it as a buy. On November 1, Virtusa reported its 2Q fiscal 2013 financial results (here), which was in-line on EPS and beat expectations on revenues. On that occasion, Kris Canekeratne, Virtusa's Chairman and CEO, stated:

This was a very solid quarter for Virtusa, and we have strong momentum entering the second half of the fiscal year. We have steadily expanded client relationships, added more sources of recurring revenue and established Virtusa as a thought leader on transformational programs and millennial enterprise readiness. Our targeted solutions and services are increasing the value we provide to our clients and helping us to navigate the macroeconomic challenges more effectively.

All these factors -- the cheap valuation, the strong growth prospects, the analysts' recommendations and the fact that the stock is in an uptrend -- make VRTU stock quite attractive.

Chart: finviz.com

Zix Corporation (NASDAQ:ZIXI)

Zix Corporation provides email encryption solutions in the software as a service model in the United States.

Zix Corporation has no debt at all, and it has a very low trailing P/E of 8.29 and a low forward P/E of 13.43. The PEG ratio is extremely low at 0.41. The price to free cash flow for the trailing 12 months is very low at 13.06. The average annual earnings growth for the past five years was extremely high at 50.83%, and the average annual earnings growth estimates for the next five years are also very high at 20%. The company is trading 17.3% below its 52-week high and has 62% upside potential based on the consensus mean target price of $4.58. The stock price is 2.30% above its 20-day simple moving average, 1.55% above its 50-day simple moving average and 3.38% above its 200-day simple moving average. Analysts recommend the stock. Among the four analysts covering the stock, one rates it as a strong buy and three rate it as a buy. On October 23, Zix Corporation reported its 3Q financial results (here), ZIXI beat estimates on revenues and was in-line on EPS.

Third Quarter 2012 Financial Highlights:

  • Third quarter new first year orders of $2.6 million, including a one-time catch up of approximately $300,000.
  • New first year orders for the nine months ended Sept. 30, 2012, were $6.8 million compared to $5.2 million for the same period last year, representing 31.0% year-over-year growth.
  • Third quarter revenue of $11.0 million, an increase of 15.3%, year-over-year, the Company's 15th consecutive quarterly record in revenue.
  • Third quarter GAAP net income of $0.03 per share, a decrease of 18.9%, year-over-year.
  • Third quarter Non-GAAP net income of $0.04 per share, an increase of 3.6%, year-over-year.
  • The Company generated approximately $4.6 million in cash flow from operations, a decrease of $0.1 million, year-over-year.
  • Cash and cash equivalents totaled $23.0 million, an increase of $4.2 million compared to the June 30, 2012, ending cash balance.

The cheap valuation, the strong growth prospects, the analysts' recommendations and the positive 3Q financial results are all factors that make ZIXI stock quite attractive.

Chart: finviz.com

Source: 6 High Growth Stocks In An Uptrend With Very Low PEG Ratios