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I have searched for profitable companies with very strong growth prospects. Those stocks would have to show a very low debt and a very low PEG ratio. I also looked for companies where the average analysts' recommendation is a buy or better, and which are in a short-term uptrend, in a mid-term uptrend and in a long-term uptrend. Stocks in an uptrend are performing well and are in a buying mode.

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 following demands:

  1. Average annual earnings growth estimates for the next 5 years is greater than 17%.
  2. Price to free cash flow is less than or equal to 15, (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).
  3. Forward P/E is less than 15.
  4. The PEG Ratio is less or equal than 1.00.
  5. Total debt to equity is less than 0.05.
  6. The Enterprise Value is less than the Market Cap of the company.
  7. Average analyst recommendations are bullish (less than 2).
  8. Stock price is above 20-day simple moving average (short-term uptrend).
  9. Stock price is above 50-day simple moving average (mid-term uptrend).
  10. Stock price is above 200-day simple moving average (long-term uptrend).

After running this screen on January 09, 2013, before the market open, , I discovered the following four stocks:

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Alliance Fiber Optic Products Inc. (NASDAQ:AFOP)

Alliance Fiber Optic Products, Inc. designs, manufactures, and markets various fiber optic components and integrated modules for the optical network equipment market.

Alliance Fiber Optic Products has no debt at all and the forward P/E is quite low at 14.00. The PEG ratio is very low at 0.93 and the price to free cash flow for the trailing 12 months is quite low at 15.00. The average annual earnings growth for the past five years was very high at 46.07 and the average annual earnings growth estimates for the next five years is also very high at 25%. The forward annual dividend yield is at 2.03% and the payout ratio is 47.2%. The stock price is 4.27% above its 20-day simple moving average, 14.86% above its 50-day simple moving average and 41.12% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend. Only two analysts are covering the stock; both analysts rate it as a strong buy. On October 25, 2012, Alliance Fiber Optic reported its 3Q financial results. Revenue for the third quarter of 2012 totaled $12,390,000, a 8% increase from revenue of $11,527,000 reported in the previous quarter, and a 5% increase from revenue of $11,778,000 reported in the third quarter of 2011. The company recorded net income for the third quarter of 2012 of $1,892,000, or $0.22 per share, compared with $1,232,000, or $0.14 per share for the second quarter of 2012. This compares with net income for the third quarter of 2011 of $1,454,000, or $0.16 per share.

The compelling valuation metrics, the strong growth prospects, the analyst's recommendation and the impressive 3Q financial results ; all these factors make the AFOP stock very attractive.

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Chart: finviz.com

Century Casinos Inc. (NASDAQ:CNTY)

Century Casinos, Inc., a casino entertainment company, develops and operates gaming establishments, and related lodging, restaurant, and entertainment facilities worldwide.

Century Casinos has a very low debt (total debt to equity is only 0.03) and the forward P/E is very low at 10.25. The PEG ratio is very low at 0.56 and the price to free cash flow for the trailing 12 months is very low at 9.04. The average annual earnings growth for the past five years was at 6.31% and the average annual earnings growth estimates for the next five years is very high at 30%. The stock price is 2.55% above its 20-day simple moving average, 4.24% above its 50-day simple moving average and 3.68% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend. Only one analyst is covering the stock rating it as a strong buy. The company is trading 10.03% below its 52-week high and has 40% upside potential based on the consensus mean target price of $4.02.

On November 07, 2012, Century Casinos reported its 3Q financial results. In the report, Erwin Haitzmann and Peter Hoetzinger, Co Chief Executive Officers of Century Casinos said:

We are pleased to report another quarter with growth in revenue. All our properties posted solid results in the third quarter, with the single exception of Calgary, Canada. Even though that casino saw table drop increase significantly, by 58%, and also slot coin-in by 8%, lower hold percentages as well as a decrease in food and beverage and bowling revenues, coupled with higher marketing costs, led to a decline in Adjusted EBITDA at the property. Nevertheless, we are optimistic about the Calgary market and are focusing on implementing changes that will raise guests' gaming experience and promote further operating efficiencies to improve the results at our property in Calgary. We are pleased to announce the potential purchase of an additional 33% share of Casinos Poland Ltd and we continue to actively pursue domestic and international casino opportunities.

The compelling valuation metrics, the strong growth prospects, the 40% upside potential based on the consensus mean target price of $4.02 and the fact that the stock is in an uptrend are all factors that make CNTY stock quite attractive.

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Chart: finviz.com

Kona Grill Inc. (NASDAQ:KONA)

Kona Grill, Inc. owns and operates upscale casual dining restaurants in the United States. Its restaurants offer prepared food items and alcoholic beverages.

Kona Grill has a very low debt (total debt to equity is only 0.02) and the forward P/E is quite low at 14.73. The PEG ratio is very low at 0.87 and the price to free cash flow for the trailing 12 months is very low at 11.99. The average annual sales growth for the past five years was quite high at 13.23% and the average annual earnings growth estimates for the next five years is very high at 17.50%. The stock price is 1.85% above its 20-day simple moving average, 0.88% above its 50-day simple moving average and 7.09% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend. Analysts recommend the stock, among the five analysts covering the stock, two rate it as a strong buy, two rate it as a buy and only one rates it as a hold. The stock is trading 8.43% below its 52-week high and has 19.7% upside potential based on the consensus mean target price of $10.40.

On November 05, 2012, Kona Grill reported its 3Q financial results. In the report, Berke Bakay, president and CEO of Kona Grill said:

Our comps during the quarter represent the eighth consecutive quarter of positive same-store sales and eleventh consecutive quarter of positive traffic. We continue to drive positive traffic with the execution of our innovative menu offerings and guest service initiatives. Despite a challenging sales environment in the quarter, we were able to deliver a healthy operating margin of 18.5%. For the first nine months of the year, Kona's 19.3% operating margin remains at the top of our peer group and we've grown income from continuing operations 179% to $4.4 million.

All these factors -- the low multiples, the strong growth prospects, the strong analyst's recommendation and fact that the stock is in an uptrend -- make KONA stock quite attractive.

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Chart: finviz.com

Nautilus Inc. (NYSE:NLS)

Nautilus, Inc., together with its subsidiaries, operates as a consumer fitness products company primarily in the United States and Canada.

Nautilus has no debt at all and the forward P/E is very low at 9.79. The PEG ratio is extremely low at 0.35. The price to free cash flow for the trailing 12 months is very low at 14.28 and the average annual earnings growth estimates for the next five years is very high at 50%. The stock price is 3.59% above its 20-day simple moving average, 14.10% above its 50-day simple moving average and 29.78% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend. Analysts recommend the stock, among the three analysts covering the stock, two rate it as a strong buy and one rates it as a buy. The stock is trading 4.50% below its 52-week high and has 22.5% upside potential based on the consensus mean target price of $4.68.

On November 05, 2012, Nautilus reported its 3Q financial results. In the report, Bruce M. Cazenave, Chief Executive Officer, stated:

We are pleased with the performance of our business in the third quarter and first nine months of this year, as we generated sales growth and significant improvements in net income compared to the same periods last year . Our results reflect the continued strength of our Direct business, which highlights the successful execution of a number of our key initiatives, including generating strong top line growth while delivering higher gross margins.

The compelling valuation metrics, the strong growth prospects, the strong analyst's recommendation, the 22.5% upside potential based on the consensus mean target price of $4.68 and the fact that the stock is in an uptrend are all factors that make NLS stock quite attractive.

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Chart: finviz.com

 

Source: 4 Strong Growth Stocks With Positive Momentum