The stock market has been in a solid uptrend following the volatile October lows. During this time, many new companies have come public with strong fundamentals. Strong earnings and sales growth has always preceded large stock moves since the dawn of trading.
There are a lot of new IPOs investors are familiar with, from your usual media outlets, like LinkedIn (NYSE:LNKD), Yelp (NYSE:YELP), Zynga (NASDAQ:ZNGA), Michael Kors (NYSE:KORS), or the upcoming Facebook (NASDAQ:FB). However, there are quite a few recent new issues that are getting little to zero media attention that investors need to know about.
I want to take a look at four recent new issues that are showing the proper growth in fundamentals that a stock needs to become the next Priceline (NASDAQ:PCLN), Intuitive Surgical (NASDAQ:ISRG), or Apple (NASDAQ:AAPL).
We will start with Skullcandy since it is the most recognizable name on the list. Skullcandy is a Park City, UT, manufacturer of audio headphones distributed to specialty retailers focused on action sports and youth lifestyle.
Skullcandy's EPS growth has recently started to really pick up with gains of 233%, 100%, 70%, and 228% the past four quarters. Sales growth during the past eight quarters has been very impressive with gains of 52%, 49%, 19%, 36%, 66%, 46%, 58%, and 29%. Annual EPS estimates for 2012 and 2013 are for gains of 39% and 24% respectively.
Skullcandy's cash flow is a solid $0.89 per share. There is no available data yet on its debt and return on equity from my data provider MarketSmith.
Value investors will like that Skullcandy is trading at the low end of its P/E ratio trading history. Skullcandy currently sports a 17 P/E ratio near the lows of its 14-199 range.
Something that I love to see in a potential big winning stock is heavy management ownership. Heavy management ownership shows that those at the top have their money where their mouth is. In this case, Skullcandy's management is very vested, owning 48% of the shares outstanding. Mutual fund ownership is also rising, growing from 139 to 165 funds the past two reported quarters. These mutual funds now own 69% of the shares outstanding.
This next stock is definitely not a stock you or I will ever hear anyone speak about. Teavana Holdings. Teavana Holdings is an Atlanta, GA operator/franchiser of 180 tea stores in 35 states and Mexico with plans to open 50 more (28%) in 2012.
Teavana Holdings makes consistent profits with some recent large gains. EPS growth the past eight quarters has been 999%, 400%, 300%, 200%, 71%, 80%, 50%, and 100%. This is clearly being driven by sales growth which has increased 127%, 43%, 33%, 32%, 41%, 36%, 36%, and 35% the past eight quarters. The future is just as bright with 2012 and 2013 annual EPS estimates for 47% and 30% respectively.
Teavana Holding has a strong cash flow of $0.43 per share. Unfortunately, I do not have any data on debt and return on equity, from my data provider MarketSmith.
Clearly, management and mutual funds do not care about the high P/E ratio. Management owns 81% of the shares outstanding. If that is not a vote of confidence, I seriously do not know what is. Mutual fund ownership has increased from 165 to 179 funds the past two quarters and their holdings make up 99% of the current float. That is amazing.
Next we have yet another stock I have never heard spoken of from the usual round of financial talking heads. Francesca's Holdings. Francesca's Holdings is a Houston, TX, operator of 249 women's apparel boutique stores in 38 states targeting fashion conscious 18 to 35 year olds.
EPS for Francesca's Holdings has grown 100%, -20%, 63%, 100%, 67%, 125%, 15%, and 17% the past eight quarters. During the same time, sales growth has come in with gains of 88%, 67%, 74%, 80%, 62%, 62%, 47%, and 43%. This high growth is expected to continue in the near future, with 2012 and 2013 annual EPS estimates for gains of 41% and 38%.
Unfortunately there is no data available from my data provider MarketSmith on cash flow, debt, and return on equity.
Value investors will be turned off by the P/E ratio of 49, which is in the mid-range of its trading history average of 32-68. As I made mention before, this is not a problem for those that have studied the greatest stocks during the past 130 years. The greatest stocks during the past 130 years almost always sport "high" P/E ratios before their big huge price runs. When it comes to making the big money in the stock market, you are best to ignore the P/E ratio.
The strong earnings and sales growth is a key reason mutual fund ownership has increased from 136 funds to 159 from last quarter to this quarter.
Finally, let's get away from the consumer and retail space and end it with a technology name. EPAM Systems . EPAM is a Newtown, PA, provider of outsourced IT and lifecycle software development services such as design, prototyping, testing and migration.
EPS growth for EPAM Systems has been explosive with gains of 300%, 0%, 125%, 88%, 250%, 188%, 11%, and 120% the past eight quarters. Driving these gains is sales growth with gains of 12%, 33%, 58%, 89%, 73%, 60%, and 46% the past seven quarters. There are no current estimates for future annual EPS growth.
Return on equity is an extremely solid 68%. There is no data available for debt and cash flow yet from MarketSmith.
EPAM Systems currently sports a P/E ratio of 14. This should be a low enough P/E ratio for the value crowd.
There is no data on management and mutual fund ownership as of now from MarketSmith. However, you can be sure with EPS growth, sales growth, and the return on equity that mutual funds are very interested in this company.
While I am not a long-term investor and use technical analysis to time my purchases, sells, shorts, and covers these stocks clearly have a very bright future as long as the growth remains steady.
Personally, I will be looking to purchase shares of Skullcandy if it can complete the current base it is forming (November-March) and then break out to new 2012 highs on strong volume.
Teavana Holdings is currently forming a cup with handle pattern (cup is from July to February; handle is from 2/13 to current) on a daily chart. If Teavana Holdings can breakout of this pattern on strong volume, I will initiate a long position.
Francesca's Holdings is a bit wide and loose on a daily and weekly chart right now and I will have to continue to monitor the price and volume action before I consider taking a position in this stock.
EPAM Systems broke out to new highs on very heavy volume this past Thursday and a position was taken immediately. I will continue to monitor this trade for an exit signal. My cut loss on the position is a close below the 14.15 level. If the stock closes below this number I will cut my loss no matter what.
While my trading might be more for the short and intermediate term, there is no doubt that in the future all of these stocks will be trading much higher than where they are trading today. The future is indeed very bright for these fast growing dynamic companies.
Disclosure: I am long EPAM.