When one looks to buy a stock that they hope will increase in value, there are two important things that one usually checks. Growing revenues, and growing earnings per share. Growing revenues are important, but it also helps if you can translate that growth to the bottom line. Some companies can improve margins, while others are buying back stock to boost earnings per share numbers.
The following list is simple: You need to be growing revenues and EPS by at least 24% in fiscal 2012. I've chosen a variety of names across multiple sectors, so if you want to build a diversified portfolio, you can choose from a few of these names. I recently published an article on my top growth names for 2012, and to avoid repetition, only included 2 names from that list. Here are seven names that fit my criteria, and some analysis on each of them follows.
|Company||Revenue Growth||EPS Growth|
Apple: Apple is going to have a solid year as a company. The iPhone 4S has done incredibly well from all accounts, and sales of the new phone should continue their strength throughout the year. Apple is also expected to launch a new version of the iPad in the first half of 2012, and perhaps even a competitor to Amazon's Kindle Fire. We must also not forget that Apple's Mac sales are at all-time highs, and the company has a very small market share in that area. There is plenty of room for growth. Apple's earnings per share may not grow at the same rate as revenues; for the key reason read this article. Apple's share count is constantly increasing due to executive options and the like, but eventually, that number will come down. At that point, Apple's earnings per share could grow faster than its revenues.
Amazon: Amazon is constantly growing its revenues, but the company will look for a bounce back in earnings during 2012. The company added some additional expenses in the second half of 2011 to roll out its Kindle Fire, which will have an impact on margins. However, as the Fire settles in and people buy other products from the site, including e-books, margins will improve and earnings should rise. Some may clamor that the forward P/E in the mid to high 80s is a bit rich, but Amazon really trades off of its sales growth. I recently covered a short position in the name for my theoretical short position, and may actually buy some shares if they trade below $170 again. That seems to be a nice level of support, and I think the name can go higher from here.
Priceline: The online travel company has continued to be the leader of its industry, and 2012 is shaping up to be another great year for Priceline. 25% revenue growth should be fairly easy to achieve, and the company always seems to beat bottom-line expectations. Analysts have a very favorable view of the stock, with the average price target at $623 and a high target of $720. That's plenty of upside. The stock struggled to gain any momentum in the second half of 2011, and I think another good earnings report could get the name moving again. A stock split perhaps could do the trick as well.
LinkedIn: I decided that I must include one of the 2011 hype IPOs to my list. Shares of the professional online network company are still nicely above their IPO price, but about half off of the high they hit on the first day of trading. The company is still fairly early in its growth stage, but I chose to put one short candidate on my list. The company currently trades for 119 times fiscal 2012 expected earnings, and even though I think earnings estimates will rise a bit, I think the valuation is way too high. I think this name trades lower in 2012, perhaps even getting back to that IPO price.
Lululemon: Shares of the athletic apparel maker were under pressure after its latest earnings report, and I think that sets up the stock for a nice 2012. The company has solidly beat bottom-line expectations in the past, and I think that continues going forward. The company will have its first billion-dollar revenue year in the coming year, and there is still plenty of room for further growth. Some may not like the rich valuation, but sometimes you have to pay for growth. Shares at $51 are well off their $64 all-time high. I would advise anyone wanting to go long to buy on the next down move, which will probably take it under $45. The stock will be back above $50 in a couple of months. Goldman Sachs (GS) put the name on its conviction buy list on Wednesday, fueling an 8% rally in the name. It will pull back, but Goldman liking it is only another reason to get into this name.
Sina Corp: I decided to put one Chinese company on the list, and since I covered Baidu (BIDU) in my top growth picks name, I decided to include Sina. Shares of the online media and entertainment company have taken a beating over fears of increased government regulation in the industry. Shares do seem rather expensive to some, but at $53, have already come far off their $147 high. This beaten-down name is due for a comeback, and although it might trade under $50 again, should come roaring back with its growing revenues and earnings. The company hasn't even done half a billion in revenues annually yet, so there is tremendous room for growth.
Imax: The movie screen company is looking for a bounce-back year in 2012 after sales and earnings both declined in 2011. The company has opened new theaters and has more screens than it did in the past, but a sluggish economy led consumer spending on the higher priced movies to fall off. Imax is expecting a solid rebound this year, and has done quite well in the past month with Mission Impossible. With the jobs picture and economy showing some improvement, there may be more money for people to spend on entertainment, and that will help the name going forward.