At Equities Lab we are committed to providing recommendations that we truly believe in. The following recommendations have earned our belief based on the criteria used to find the stock and the validation process. This goes beyond just simply screening for criteria that we would like to see in a stock. We carefully test individual criteria that goes into the screen and validate that is has a positive effect on performance over time. We then back test the strategy as a whole to see what your return would have been if you would have bought and held the stocks while they passed the strategy then sold them when they no longer pass the strategy. Then we analyze that currently pass the strategy and if they look good to us then we deliver them to you.
With that being said the stocks SanDisk Corporation (SNDK), Aspen Technology Inc. (AZPN), and Sirona Dental Systems Inc. (SIRO) have earned our recommendation. We found these stocks by screening for companies that meet the following criteria:
- Their Piotroski F-Score must be 9 out of 9
- Their average sales growth over the past 3 fiscal years must be greater than 10%
- Their sales growth from the previous quarter compared to the same quarter last year must be greater than 10%
- They must be American stocks
Does the Strategy Work?
According to our back test, this strategy has produced a 27% annual return since June of 2003 with about 500 trades.. A description of how our back test works can be found here.
What is the Piotroski F Score?
The Piotroski F-Score is a value we use often in our creation of long and short strategies. It is a score from 0 to 9 that measures overall fundamental health. A good description and performance statistics on the Piotroski F Score can be found on one of our previous Seeking Alpha articles here.
SanDisk Corporation designs, develops and manufactures data storage solutions in a range of form factors using its flash memory, controller and firmware technologies according to our data from AAII. Some green flags surrounding the stock found using our tear sheets are:
- 1.3% yield with a payout ratio of only 5.8% trailing 12 months which suggests the dividend has a lot of room to grow
- Estimated 5 year growth rate of 25.3% which was revised up from 25.1% one month ago
- Current year EPS estimate revised from 4.8 to 5.2 over the past month
- Next Year's EPS estimate revised from 5.3 to 5.8 over the past month.
- Heavy Institutional Purchasing: Over the past 2 months about 6 million shares have been accumulated by institutions. Institutional ownership has gone from 90% to 98.6% over the past month
- Shares outstanding have decreased from 241.7 million to 230.3 million over the past year
- A PE ratio of 18.2 compared to its industry average of 20.1
- Liabilities per assets of .26 compared to an industry average of .49
- Beta of 1.45 suggests high volatility
- Price to sales of 2.7 is well above industry average of 1.49
- Sales are highly dependent on the success/failure of Apple's iPod
Aspen Technology Inc. is a global provider of process optimization software solutions, which are designed to manage and optimize plant and process design, operational performance, and supply chain planning. Green flags:
- EPS growth of 22% from 5 quarters ago to last quarter, 46% from 6 quarters ago to 2 quarters ago, and annualized growth over 3 years of 34%
- Sales growth of 22.5% from 5 quarters ago to last quarter, 30.2% from 6 quarters ago to 2 quarters ago, and annualized growth over 3 years of 23.3%
- Very strong and consistent price performance over the past 5 years
- An Equities Lab income Statement Score of 9 out of 10
- A beta of .74 suggesting relatively low volatility
- No long-term debt
- Price to Book of 37.5 is well above the industry average of 11.1
- Liabilities per assets of .74 is above the industry average of .52
- Price to Sales and Price to Earnings of 10.8 and 64.3, respectively, are well above the industry averages
Sirona Dental Systems
Sirona Dental Systems Inc. and its subsidiaries is a manufacturer of dental equipment, and is focused on developing, manufacturing and marketing solutions for dentists around the world.
- Cash holdings of 205.7 compared to 104.6 from the same quarter last year
- Price to sales of 3.7 is lower than the industry average of 4.4 and PE of 27.9 is lower than the industry average of 32.1
- Long-term debt to equity of 6.9% is lower than the industry average of 26.5%
- Annualized EPS growth over the past 3 years of 35.4%
- Annualized sales growth over the past 3 years of 11.1%, sales growth of 17% from 5 quarters ago to last quarter, sales growth of 15.3% from 6 quarters ago to 2 quarters ago.
- An Equities Lab Income Statement score of 8 out of 10 and a Balance Sheet Score of 8 out of 10
- Minor institutional selling over the past couple of months. Since the beginning of October institutional shares purchased of 948 thousand is much lower than institutional shares sold of 1.769 million
- Beta of 1.31 suggests volatility
SNDK, AZPN, and SIRO offer great fundamentals and growth prospects to their shareholders. They pass a strategy that has significantly out performed the market in the past and they also each have their own set of green flags that create individual and institutional demand. Look for these three stocks to continue trading higher throughout the rest of the year and keep an eye out for SIRO's earnings release on November 22, 2013.