By Roger Choudhury
Investors with long-term time horizons would be well advised to invest in companies that have the potential to grow revenues year after year and just hold on for the ride. To uncover some ideas, we screened for companies with 10 straight years of consecutive earnings and revenue growth. Below is a list of 10 companies that fit these criteria. Keep in mind these companies are all US-based. If you’re looking for growth names outside America’s borders, check out this list of 6 emerging market names we uncovered on Friday. And as always, please do your own due diligence and use the list below as a starting point for your own research.
Apollo Group (APOL) is a for-profit education provider. The University of Phoenix is its hallmark brand. The Company has also exceeded earnings forecasts for 9 straight quarters. In FY 2010, revenue increased by almost 24%, but profits fell by 7.57%. For Q1 2011, profits fell 2% compared to Q1 2010. EPS fell by 3.5% in FY 2010, but is up $0.07 from $1.54 to $1.61 in Q1 2011 from Q1 2010. For Q2 2011, the EPS estimate is $0.69. This is $0.15 lower than Q2 2010. Trading volume was high on Friday with 4.54 million shares changing hands.
Also, on Friday, the House blocked a measure designed to prevent students at for-profit colleges from accessing federal student aid. This bodes well for Apollo and the rest of the industry, which we detailed here. We anticipate that operating margins will fall to 22% in 2011 as the orientation program and restructuring measures kick into full gear, and we expect revenue growth to average 1% over the next 5 years. Both enrollment and earnings growth are likely to resume by 2014, putting positive pressure on margins. We believe shares are worth $75 apiece based off our discounted cash flow estimate.
Google (GOOG) uses automated search technology to guide users to websites and generates revenue by delivering online advertising. In FY 2010, revenues jumped by 23.9%, net income went up by 30.4%, and EPS grew by 28.9%. Google has exceeded consensus estimates in 8 of the last 9 quarters. EPS is forecasted to be $8.12, which is higher than the actual $6.76 in Q1 2010.
As we outlined here, we believe Google will be the king of search for a long time to come. We think Google can leverage its significant lead in paid search to target lucrative opportunities in online software and ad sales business lines. A large cash hoard continues to sit on its books, which is depressing Google's current multiple. We think the company can make further gains in search market share and reach mid-teens revenue growth from this growth engine. We value shares at $650 apiece with a 10% discount rate.
Express Scripts (ESRX) offers a range of services, which include health maintenance organizations (HMOs), health insurers, third-party administrators, employers, union-sponsored benefit plans, workers’ compensation plans and government health programs. Revenue grew up over 80%, net income increased by 42%, and EPS was up by 39% in FY 2010. The next earnings estimate is $0.70 per share. This is significantly higher than the actual figure of $0.55 per share in the same period for last year. The Company is aggressively using generic drugs, and faces lower drug costs due to its business model.
United Health (UNH) provides health insurance, and operates in 4 business segments: Health Benefits, which includes UnitedHealthcare, Ovations and AmeriChoice; OptumHealth; Ingenix and Prescription Solutions. The company has beaten earnings estimates for the last 9 quarters. In FY 2010, revenue grew up 8%, net income increased by 21%, and EPS jumped by 26.54%. In FY 2009, EPS also shot up by 35%. The next earnings estimate is $0.87 for Q1 2011, which is $0.16 lower than the same quarter for last year. The forward P/E is 10.2, while it currently trades at a P/E multiple of 10.4. Additionally, due to good fortunes, the Company paid out dividends in 2010. On the whole we like the healthcare industry over the long term, and though we don’t foresee Buffett picking up shares of UNH, we could see him investing in these healthcare five stocks.
Amerisource Bergen (ABC) provides drug distribution and related services. In FY 2010, revenue grew by 8.63%, net income rose by 26%, and EPS increased by 33%. For the trailing 9 quarters, the Company beat earnings estimates, and is expected to make $0.06 higher in earnings per share in Q2 2011 than in Q2 2010. Healthy P/E growth is expected from the reported $0.63 in Q2 2010 to $0.69 to Q2 2011. The forward P/E is 13.9, and it is currently trading at a multiple of 16.6 times earnings. The company has paid out a dividend for several years, and the current yield is around 1%.
Wal-Mart Stores (WMT) operates retail stores in the US, Puerto Rico and 14 other countries. As of October 31, 2010 or the end of Q3 2010, revenues are up 6%, net income is up 7.5%, and EPS is up from $2.47 to 2.79 compared to the same 9 months in FY 2009. EPS is forecasted to be $1.31 per share in Q4 2010 compared to the actual $1.17 in Q4 2009. Given consumer debt, underwater mortgages and high unemployment in the US, we believe consumers will continue to shop at Wal-Mart. Shares trade at $55.38 at the time of writing and yield 2.20%. While Wal-Mart didn’t make our initial list of dividend “kings” for 2011, it was certainly in the running.
Walgreen (WAG) operates a drugstore chain in the US also with access to consumer goods and services. Revenues grew by 6.45%, profits rose by 4.2%, and EPS increased by almost 5% in FY 2010. In the first quarter of FY 2011, at November 31, 2010, revenues were up by 6%, net income jumped by 18.6%, and EPS grew from $0.49 to $0.62 compared to the same end of the quarter results in 2009. For Q2 2011, EPS is estimated to be $0.79, which is $0.11 higher than the actual figure for Q2 2010. Walgreen also pays out a dividend with a current yield of 1.6%.
Autozone (AZO) is a retailer and a distributor of automotive replacement parts and accessories. In FY 2010, revenue rose by 8%, profits grew by over 12%, and EPS shot up by 27.6%. Compared to the same quarter ending in November 2009, revenues went up by 12.7%, profits increased by 20%, and EPS went up by $0.95 from $2.82 to $3.77. Forecasts state that the next EPS would be $3.05, which is higher than the actual $2.46 per share in the same season last year.
Coach (COH) is a marketer of fine accessories and gifts for women and men. From June 2009 to June 2010, revenues grew by 11.6%, profits jumped by 17.9%, and EPS increased by 21.9%. For the 6 months of July through December in 2010 compared to the same period in 2009, revenues are up by 19.1%, profits are up by 28.9%, and EPS went from $1.19 to $1.62. The next EPS is expected to be $0.61 compared to the actual $0.50 in the same timeframe. The Company paid out dividends in 2010 that yielded 1%.
General Mills (GIS) is a global manufacturer and marketer of consumer foods sold through retail stores. It also supplies food products to the food service and commercial baking industries. From May 2009 to May 2010, revenues crept up by 0.7%, but profits grew by 17.3%, and EPS increased by 17.8%. For the 6 months after May 2010, revenues increased by 1.1%, net income rose by 10.1%, and EPS came in at $1.63 compared to $1.46 for the same 6 months period a year back. EPS is estimated to come in at $0.56, which is higher than the actual $0.49 for the same period last year. General Mills also pays out a generous dividend, which currently yields 3%.