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Earnings growth is good because it increases earnings meaningfully and lets the current P/E ratio go down. This is the reason investors pay 20, 50 or even 100 times of earnings for an investment. But you really make money if you buy a stock that beats analyst expectations and generates additional growth fantasies.

Let’s take a look into the application and software industry. The industry offers a current dividend yield of 1.8 percent. The average price to earnings ratio amounts to 17.5, representing an earnings yield of 5.7 percent.

I analyzed the application and software industry by growth stocks with a marketcapitalization of more than $300 million. My first condition is that the 5-year sales and earnings per share growth should be above 15 percent. Further, the company should have additional growth potential, measured by an expected 5-year EPS growth of more than 10 percent yearly. Finally, the growth should create value. This fact is covered by the ratio return on investment (ROI). The ratio shows how efficiently a company converts its debt and equity into profits. I decided to screen only stocks with a ROI of more than 10 percent. Here are the results:

1. SXC Health Solutions (NASDAQ:DLLR) has a market capitalization of $3.58 billion, generates revenues in an amount of $3.3 billion and a net income of $72.6 million. Its following P/E ratio is 50.0 and forward price to earnings 27.0, Price/Sales 1.1 and Price/Book ratio 5.9. Dividend Yield: 0 percent. The company grew 104.8 percent in sales and 32.6 percent in EPS over the past five years. For the upcoming five years, the EPS growth is expected to grow 30.8 percent. The ROI is 12.5 percent.

2. F5 Networks (NASDAQ:FFIV) has a market capitalization of $7.1 billion, generates revenues in an amount of $1.1 billion and a net income of $222.0 million. Its following P/E ratio is 32.2 and forward price to earnings 20.3, Price/Sales 6.5 and Price/Book ratio 6.1. Dividend Yield: 0 percent. The company grew 25.7 percent in sales and 25.3 percent in EPS over the past five years. For the upcoming five years, the EPS growth is expected to grow 22.2 percent. The ROI is 19.7 percent.

3. CommVault Systems (NASDAQ:CVLT) has a market capitalization of $1.9 billion, generates revenues in an amount of $340.0 million and a net income of $24.6 million. Its following P/E ratio is 78.4 and forward price to earnings 39.2, Price/Sales 5.4 and Price/Book ratio 9.0. Dividend Yield: 0 percent. The company grew 23.5 percent in sales and 22.5 percent in EPS over the past five years. For the upcoming five years, the EPS growth is expected to grow 19.7 percent. The ROI is 12.3 percent.

4. NIC (NASDAQ:EGOV) has a market capitalization of $764.0 million, generates revenues in an amount of $171.7 million and a net income of $21.3 million. Its following P/E ratio is 36.1 and forward price to earnings 27.7, Price/Sales 4.5 and Price/Book ratio 11.4. Dividend Yield: 0 percent. The company grew 22.2 percent in sales and 21.9 percent in EPS over the past five years. For the upcoming five years, the EPS growth is expected to grow 17.5 percent. The ROI is 34.3 percent.

5. Oracle (NYSE:ORCL) has a market capitalization of $157.1 billion, generates revenues in an amount of $36.1 billion and a net income of $9.0 billion. Its following P/E ratio is 17.7 and forward price to earnings 11.8, Price/Sales 4.3 and Price/Book ratio 3.9. Dividend Yield: 0.8 percent. The company grew 19.9 percent in sales and 21.1 percent in EPS over the past five years. For the upcoming five years, the EPS growth is expected to grow 12.7 percent. The ROI is 16.2 percent.

6. Rightnow Technologies (NASDAQ:RNOW) has a market capitalization of $1.2 billion, generates revenues in an amount of $207.1 million and a net income of $28.0 million. Its following P/E ratio is 49.0 and forward price to earnings 44.9, Price/Sales 6.0 and Price/Book ratio 12.5. Dividend Yield: 0 percent. The company grew 16.3 percent in sales and 29.2 percent in EPS over the past five years. For the upcoming five years, the EPS growth is expected to grow 22.0 percent. The ROI is 16.8 percent.

Source: 6 Fastest-Growing Application And Software Stocks