Seeking Alpha
Recommended for you:
, Portfolio123 (1,626 clicks)
Long only, value, research analyst, dividend investing
Profile| Send Message|
( followers)  

One way to find stocks with a better chance to outperform the market is to look for stocks with very strong earnings growth prospects. Those stocks will have to show also a very low debt and a very low PEG ratio.

I introduced in the finviz.com Screener the following demands:

  • EPS growth next 5 years - Over 25%
  • Trailing P/E - Under 20
  • Total debt to equity - Under 0.1

As a result, only 12 stocks came out. In this article, I describe three of these stocks which in my opinion can reward an investor a nice capital gain. I recommend readers use this list of stocks as a basis for further research. All the data for this article were taken from Portfolio123, finviz.com and Yahoo Finance, on September 30, 2013, before the market open.

IPG Photonics Corporation (NASDAQ:IPGP)

IPG Photonics Corporation develops and manufactures fiber lasers, fiber amplifiers, and diode lasers that are used in various applications.

IPG Photonics has a very low debt (total debt to equity is only 0.02), and it has a trailing P/E of 19.63 and a forward P/E of 15.89. The PEG ratio is very low at 0.56, and the average annual earnings growth estimates for the next five years is very high at 35%. The price-to-cash ratio is low at 7.98, and the current ratio is very high at 7.30.

Analysts recommend the stock. Among the ten analysts covering the stock, four rate it as a strong buy, three rate it as a buy, and three rate it as a hold.

IPG Photonics has recorded strong revenue and EPS growth, during the last year, the last three years, and the last five years, as shown in the table below.

Source: Portfolio123

The tables below emphasize the IPG Photonics' superior growth rates and margins over the industry median, the sector median and the S&P 500 median.

(click to enlarge)

(click to enlarge)

Source: Portfolio123

On July 30, IPG Photonics reported its second-quarter financial results, which beat EPS expectations by $0.02 and beat on revenues.

In the report, Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer explained:

Strong demand for IPG's high-power lasers for materials processing applications, particularly in Asia and the U.S., drove a 22% year-over-year sales increase during the second quarter. Gross margins of 53.5% were within our target range and net income increased 11%. The strong revenue growth during the quarter further demonstrates the increasing adoption rate of fiber laser technologies for various applications. Excluding foreign exchange rate gains, operating income grew by 12.6%. While this was lower than the growth in revenue, it reflects our investment in operating expenses to support IPG's future growth.

We continue to see solid demand in most of our end markets and we maintain a strong technological advantage over our competition. Order flow in Q2 was strong and the book-to-bill ratio substantially exceeded 1. We continue to make significant investments to support the expected growth of our business, strengthen our competitive position and improve and develop new products to expand our offerings.

IPG Photonics has recorded strong revenue and EPS growth, and it has very strong earnings growth prospects. Considering IPGP's compelling valuation metrics, and the fact that its book-to-bill ratio substantially exceeded 1, IPGP stock can move much higher.

(click to enlarge)

Chart: finviz.com

Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR)

Questcor Pharmaceuticals, Inc., a biopharmaceutical company, provides drugs for the treatment of multiple sclerosis, nephrotic syndrome, and infantile spasms indications.

Questcor Pharmaceuticals has a very low debt (total debt to equity is only 0.06), and it has a trailing P/E of 15.38 and a very low forward P/E of 9.80. The PEG ratio is very low at 0.48, and the average annual earnings growth estimates for the next five years is very high at 26%. The forward annual dividend yield is very high at 1.76%, and the payout ratio is only 23.3%.

Analysts recommend the stock. Among the ten analysts covering the stock, six rate it as a strong buy, three rate it as a buy, and only one rates it as a hold.

Questcor Pharmaceuticals has recorded very strong revenue and EPS growth, during the last year, the last three years, and the last five years, as shown in the table below.

Source: Portfolio123

The tables below emphasize the Questcor Pharmaceuticals' superior growth rates and margins over the industry median, the sector median and the S&P 500 median.

(click to enlarge)

(click to enlarge)

Source: Portfolio123

QCOR will report its latest quarterly financial results on October 14. QCOR is expected to post a profit of $1.29 a share, a 33% rise from the company's actual earnings for the same quarter a year ago.

Questcor Pharmaceuticals has recorded very strong revenue and EPS growth, and it has very strong earnings growth prospects, and considering its compelling valuation metrics, QCOR stock can move higher. Furthermore, the solid dividend represents a nice income.

(click to enlarge)

Chart: finviz.com

Winnebago Industries, Inc. (NYSE:WGO)

Winnebago Industries, Inc., together with its subsidiaries, manufactures and sells recreation vehicles primarily for use in leisure travel and outdoor recreation activities.

(click to enlarge)

Winnebago Industries has no debt at all, and it has a very low trailing P/E of 11.62 and a forward P/E of 20.44. The PEG ratio is very low at 0.41, and the average annual earnings growth estimates for the next 5 years is extremely high at 49.60%. The price-to-sales ratio is very low at 0.93, and the price-to-cash ratio is at 14.95

The WGO stock price is 10.28% above its 20-day simple moving average, 7.41% above its 50-day simple moving average and 22.35% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Analysts recommend the stock. Among the four analysts covering the stock, two rate it as a strong buy, and two rate it as a hold.

Winnebago Industries has recorded strong revenue and EPS growth, during the last year and the last three years, as shown in the table below.

Source: Portfolio123

WGO will report its latest quarterly financial results on October 15. WGO is expected to post a profit of $0.27 a share, an 80% rise from the company's actual earnings for the same quarter a year ago.

Winnebago Industries has recorded strong revenue and EPS growth, and considering its strong growth prospects, its compelling valuation metrics, and the fact that the stock is in an uptrend, WGO stock still has a room to go up.

(click to enlarge)

Chart: finviz.com

Source: 3 Compelling Small And Mid Cap Strong-Growth Stocks