The list below features stocks that show strong potential for growth that also receive top marks for good corporate citizenship.
We began by screening for 5-year projected EPS growth above 15%, a signal that investors see strong long-term growth potential. Could there be an additional reason for these high growth prospects?
We limited our search to rallying stocks, which can also trigger positive sentiments. Specifically we ran a screen for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages, indicating that these stocks have strong upward momentum.
Finally, we cross-referenced the Corporate Responsibility Magazine's 2013 100 Best Corporate Citizens List. The list is screened from a universe of Russell 1000 companies. Based on publicly-available data sources the list takes into account categories such as climate change, employee relations, governance, human rights and more.
We were left with four companies, listed below in the order of their CR Magazine 2013 ranking.
For an interactive version of this chart, click on the image below. Average analyst recommendation sourced from Zacks Investment Research.
Do you think these good corporate citizens will meet their high-growth projections? Use this list as a starting point for your own analysis.
1. The McGraw-Hill Companies, Inc. (MHP): Provides various information services for financial, educational, and business information markets worldwide.
Market cap at $14.92B, most recent closing price at $54.43.
EPS growth predicted for the next five years is: 18.15%
The stock is currently trading 3.74% above its 20-day moving average, 8.16% above its 50-day moving average, and 5.95% above its 200-day moving average.
CR Magazine Ranking: 19
MHP has recorded a solid performance over the last month, returning 5.61% since 4/5/13. This performance has eclipsed competitors including Pearson plc (PSO) and Courier Corporation (CRRC), but falls short of Scholastic Corporation (SCHL), which returned 6.51% during the same holding period. The stock's higher than average projected earnings growth rate over the next 5 years (18.15%) is notably stronger than some of its competitors: PSO projected EPS growth over next 5 years is 3.30% and CRRC projected EPS growth over next 5 years stands at 0.0%.
MHP has received mostly positive assessments from analysts as of late, including a strong buy rating from Raymond James, which also increased its target price for the stock from $62.00 to $63.00. Analysts at Benchmark Co. lifted their price target from $57.00 to $59.00, now rating the stock as a buy. TheStreet reiterated a buy rating MHP on Thursday, April 11th, noting factors such as a debt to equity ratio of 1.5, below the industry average. MHP currently has an average consensus price target of $57.00 and an average rating of Buy.
2. Starbucks Corporation (SBUX): Operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores.
Market cap at $46.32B, most recent closing price at $61.87.
EPS growth predicted for the next five years is: 18.73%
The stock is currently trading 5.56% above its 20-day moving average, 8.18% above its 50-day moving average, and 19.06% above its 200-day moving average.
CR Magazine Ranking: 39
SBUX has turned in a respectable performance over the last month, returning 7.04% since 4/5/13. This surpassed Dunkin' Brands Group, Inc. (DNKN), but still lags Green Mountain Coffee Roasters Inc. (GMCR), which returned 9.11% during the same holding period. And SBUX has shown solid growth over the last three years, with its operating profit margin showing annualized change of 14.77%, in comparison to the sector average of 11.59%.
Investors should take note of the strong emphasis SBUX is placing on company mergers and acquisitions, investing a reported $617.55 million in the last year, 20.63% of available cash in this period according to The New York Times. Along with the signature Starbucks brand, SBUX includes Tazo Tea, Seattle's Best Coffee, Starbucks VIA Ready Brew, Starbucks Refreshers beverages, Ethos Bottled Water, Evolution Fresh, Hear Music and the Verismo System by Starbucks. Recent acquisitions include the food & beverage retailing company Teavana Holdings Inc. for $617.55M, and Bay Bread LLC, a privately held San Francisco-based French-themed bakery, in a deal worth an estimated $100M in cash.
3. Southwest Airlines Co. (LUV): Operates as a passenger airline that provides scheduled air transportation in the United States.
- Market cap at $10.16B, most recent closing price at $14.07.
EPS growth predicted for the next five years is: 33%
The stock is currently trading 7.26% above its 20-day moving average, 11.66% above its 50-day moving average, and 36.32% above its 200-day moving average.
CR Magazine Ranking: 69
LUV has generated strong returns over the last month, returning 9.84% since 4/5/13. LUV outstripped competitors including Ryanair Holdings plc (RYAAY) and Alaska Air Group, Inc. (ALK), but fell behind Copa Holdings SA (CPA), which returned 12.27% during the same holding period. Earnings growth over the last year has been exceptionally strong, with EPS growing by 143.87%, significantly higher than both ALK (EPS growth over the last year at 32.19%) and CPA (EPS growth over the last year at 5.39%).
LUV has outperformed the S&P 500 over the last 52 weeks, gaining 75.93%. And it seems recent events can further boost the stock. After Congress voted at the end of April to reduce the impact of the sequestration on the FAA, air traffic facilities across the country were able to resume regular staffing levels within day. This was good news for LUV, which operates over 3,000 flights per day carrying more domestic passengers than any other US airline, servicing more than 80 destinations across 41 states and Puerto Rico. And the company's merger with AirTran, begun in May 2011, has advanced at a slower pace than expected, leading to far less friction than other high-profile airline mergers of late, as explained by The Motley Fool.
4. Green Mountain Coffee Roasters Inc. (GMCR): Engages in the specialty coffee and coffee maker business.
Market cap at $8.64B, most recent closing price at $58.08.
EPS growth predicted for the next five years is: 19.15%
The stock is currently trading 4.39% above its 20-day moving average, 8.64% above its 50-day moving average, and 59.55% above its 200-day moving average.
CR Magazine Ranking: 95
GMCR has reported strong earnings growth over the last year, with EPS growing by 73.84%, higher than competitors like Starbucks Corporation (EPS growth over the last year at 10.61%) and Unilever plc (EPS growth over the last year at 5.08%). However, when comparing valuation ratios to industry averages, Green Mountain Coffee Roasters Inc. looks expensive. The stock's Price / Free Cash Flow ratio stands at 29.15, much higher than Starbucks Corporation (P/FCF ratio at 0) and Seneca Foods Corp. (P/FCF ratio at 0).
And short sellers think there's more downside to the stock, especially when comparing short float to industry averages. GMCR short float stands at 26.49%, which is equivalent to 8.94 days of average trading volume. This comes despite recent accolades won by the company at the prestigious Edison Awards last month, as described by Yahoo! Finance.
*EPS data sourced from Yahoo! Finance, Corporate Citizens List sourced from Corporate Responsibility Magazine, all other data sourced from Finviz.