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I searched for very profitable stocks with strong growth prospects. These stocks would have to show stable financial conditions and generate positive free cash flow. However, in order to find the proper moment to open a position, a technical analysis with a momentum indicator can be of great assistance for investors.

I have elaborated a screening method, which 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 demands:

1. The stock is included in the Russell 3000 index. Russell Investment explanation:

The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected.

2. Average annual earnings growth estimates for the next 5 years is greater than 17%.

3. Price to free cash flow is less than 18, (many investors prefer using free cash flow instead of net income to measure a company's financial performance, because free cash flow is more difficult to manipulate. Free cash flow is the operating cash flow minus capital expenditure).

4. The PEG ratio is less than 1.40.

5. The 10-day moving average is above 20-day moving average, and the crossover happened 2 days or less prior to the start of the screen (Short term momentum indicator).

I used Portfolio123's powerful free screener to perform the search. After running this screen on January 05, I obtained as results the 4 following stocks:

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FXCM Inc. (NYSE:FXCM)

FXCM Inc. provides online foreign exchange trading and related services to retail and institutional customers worldwide.

FXCM has very low debt (total debt to equity is only 0.41) and it has a very low forward P/E of 11.55 and quite a low PEG ratio of 1.11. The price to free cash flow for the trailing 12 months is very low at 7.01 and the average annual earnings growth estimates for the next 5 years is very high at 20.15%. The stock is trading 21.6% below its 52-week high and has 14.7% upside potential based on the consensus mean target price of $12.06.

FXCM pays dividends, the forward annual dividend yield is at 2.30%, and the payout ratio is only 50%. Analysts recommend the stock, among the nine analysts covering the stock, eight rate it as a buy and one rates it as a hold. The stock price is 5.27% above its 20-day simple moving average, 9.14% above its 50-day simple moving average and 1.88% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend. On November 08, 2012, FXCM Inc. reported its 3Q financial results (here), which beat expectations on EPS by $0.03 and beat expectations on revenue. In that announcement, Drew Niv, Chief Executive Officer said:

FXCM turned in a solid quarter despite the continued low volatility of the global FX markets and subdued trading environment. In addition, our cash generation in the quarter was particularly strong and we earned $37.2 million in EBITDA and $0.31 in cash earnings per share.

The compelling valuation metrics, the strong growth prospects, the solid dividend, the analysts' recommendation and the fact that the stock is in an uptrend are all factors that make FXCM stock quite attractive.

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Chart: finviz.com

Kimball International, Inc. (KBALB)

Kimball International, Inc. manufactures and sells electronic assemblies and furniture in the United States, Poland, the United Kingdom, and internationally.

Kimball International has no debt at all and it has a forward P/E of 20.23, the PEG ratio is quite low at 1.01. The price to free cash flow for the trailing 12 months is very low at 11.11 and the average annual earnings growth estimates for the next 5 years is very high at 27.7%.

KBALB pays dividends, the forward annual dividend yield is at 1.60%, and the payout ratio is only 49%. The stock price is 5.96% above its 20-day simple moving average, 3.16% above its 50-day simple moving average and 27.32% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend. On November 01, 2012, Kimball International reported its 1Q fiscal 2013 financial results (here). In the report, James C. Thyen, President and Chief Executive Officer, stated:

The EMS segment continued its positive momentum into the first quarter. Successful efforts by our business development team in expanding our customer base and winning new programs with existing customers contributed to double-digit revenue growth compared to last year. Also since completing our restructuring activities in the first half of last fiscal year, we no longer have the distraction or costs of consolidating operations. We have eliminated that excess capacity and that has positively impacted our bottom line. We are pleased with the progress we are seeing within the EMS segment.

All these factors -- the very strong growth prospects, the solid dividend and the fact that the stock is in an uptrend -- make KBALB stock quite attractive.

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Chart: finviz.com

Landec Corp. (NASDAQ:LNDC)

Landec Corporation designs, develops, manufactures, and sells polymer products for food and agricultural products, medical devices, and licensed partner applications, which incorporate its patented polymer technologies.

Landec has very low debt (total debt to equity is only 0.35) and it has a low forward P/E of 13.99 and a PEG ratio of 1.33. The price to free cash flow for the trailing 12 months is at 17.91 and the average annual earnings growth estimates for the next 5 years is quite high at 17.50%. The stock is trading 2.54% below its 52-week high and has 19.2% upside potential based on the consensus mean target price of $14.17. Analysts recommend the stock-- among the four analysts covering the stock, two rate it as a strong buy and two rate it as a buy. The stock price is 22.46% above its 20-day simple moving average, 21.16% above its 50-day simple moving average and 36.85% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.

On January 02, Landec Corp. reported its 2Q fiscal 2013 financial results (here), which beat expectations on EPS by $0.18 and beat expectations on revenue. Revenues for the second quarter of fiscal year 2013 increased by 41% to $114.7 million compared to revenues of $81.6 million for the second quarter of fiscal year 2012. Net income increased by 167% to $8.9 million, or $0.34 per share, compared to net income of $3.3 million, or $0.13 per share, during the second quarter of fiscal year 2012. In the report, the company gave guidance for fiscal year 2013:

As reflected in our financial results, Landec had a very good first half of fiscal year 2013 with revenue growth of 40% and net income growth of 158% compared to the same period last year. Our original guidance for all of fiscal year 2013 was to grow revenues by approximately 30% and net income by 25% to 35% compared to fiscal year 2012. Based on the results for the first half of fiscal year 2013, and barring any major adverse financial impact from winter weather in our food business, we now expect revenues to grow 33% to 38% and net income to grow 60% to 70%, which includes the additional $3.9 million, or $0.15 per share, from the non-recurring earn-out adjustment. In addition, we expect to generate $20 million to $25 million in cash flow from operations and we expect to spend approximately $8.0 million to $9.0 million in capital expenditures, slightly higher than the $7.5 million to $8.0 million in our original guidance for fiscal year 2013.

The strong growth prospects, the strong analysts' recommendation, the very good recent quarter financial results, the improved fiscal 2013 outlook and the fact that the stock is in an uptrend, are all factors that make LNDC stock quite attractive.

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Chart: finviz.com

Transocean Ltd. (NYSE:RIG)

Transocean Ltd. provides offshore contract drilling services for oil and gas wells worldwide.

Transocean has a very low forward P/E of 10.71 and a very low PEG ratio of 0.48. The price to free cash flow for the trailing 12 months is very low at 14.16 and the average annual earnings growth estimates for the next 5 years is very high at 28.97%. The stock is trading 12.21% below its 52-week high and has 15.1% upside potential based on the consensus mean target price of $59.65. The stock price is 13.28% above its 20-day simple moving average, 12.38% above its 50-day simple moving average and 10.64% above its 200-day simple moving average.

On January 03, U.S. Justice Department officials said (here) that Transocean will plead guilty to violating the Clean Water Act for the company's role in the 2010 Deepwater Horizon disaster. Transocean will pay $1 billion to settle civil penalties and $400 million in criminal fines associated with the spill. Despite the $1.4 billion penalty, Transocean's very strong growth prospects make the RIG stock quite attractive.

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Chart: finviz.com

Source: 4 Strong Growth Stocks With Positive Momentum