If you are an investor who seeks growth opportunities, one route is to search for stocks that have EPS growth rates of over 25%. To fully pursue the growth rate projections, a company needs a high level of liquidity to fund increased production, make strategic acquisitions, and open new markets. We specifically searched for industrial stocks with high liquidity and EPS growth rates of over 25% for the next year. We came up with an interesting list to start your research.
The Current Ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a Current Ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick Ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The Quick Ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the Current Ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 5-Year Expected EPS Growth Rate is a long term annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
We first looked for industrial stocks. We next screened for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We then looked for businesses with estimated high-growth, with 5-year projected EPS growth above 25%. We did not screen out any market caps.
Do you think these stocks have a strong outlook? Use this list as a starting-off point for your own analysis.
1) Proto Labs, Inc. (PRLB)
|:Industry||Machine & Tools Accessories|
Proto Labs, Inc. has a Current Ratio of 8.45, a Quick Ratio of 8.03, and a 5-Year Projected Earnings Per Share Growth Rate of 29.20%. The short interest was 45.94% as of 08/17/2012. Proto Labs, Inc. produces CNC machined and injection molded plastic parts. It offers products that are made of various engineering-grade resins, such as ABS, polycarbonate, nylon, acetal, polypropylene, acrylic, PBT, HDPE, LDPE, TPE, and TPU, as well as LCP, including glass or fiber filled grades. The company was founded in 1999 and is headquartered in Maple Plain, Minnesota.
2) TASER International Inc. (TASR)
|:Industry||/Aerospace Defense & Products Services|
TASER International Inc. has a Current Ratio of 3.87, a Quick Ratio of 3.16, and a 5-Year Projected Earnings Per Share Growth Rate of 30.00%. The short interest was 5.82% as of 08/17/2012. TASER International, Inc. develops, manufactures, and sells electronic control devices (ECD) for use in the law enforcement, military, corrections, private security, and personal defense markets. ECDs transmit electrical pulses along the wires and into the body affecting the sensory and motor functions of the peripheral nervous system. Its products for the law enforcement, military, corrections, and professional security market include the TASER X26 product line, which consists of TASER X26, various cartridges, a digital power magazine, data download software and equipment, extended warranties, and a range of holstering options and accessories; TASER X3, a multi-shot ECD that would engage three separate targets; and ADVANCED TASER M26 product line comprising the ADVANCED TASER M26, various cartridges, rechargeable batteries, a battery charging system, data download software and equipment, extended warranties, and various holstering options and accessories.
3) Dycom Industries Inc. (DY)
Dycom Industries Inc. has a Current Ratio of 3.18, a Quick Ratio of 2.92, and a 5-Year Projected Earnings Per Share Growth Rate of 42.23%. The short interest was 4.01% as of 08/17/2012. Dycom Industries, Inc. provides specialty contracting services in the United States and Canada. It offers engineering services, including the design of service area concept boxes, terminals, buried and aerial drops, transmission and central office equipment, administration of feeder and distribution cable pairs, and fiber cable routing and design for telephone companies; and make-ready studies, strand mapping, field walk-out, computer-aided radio frequency design and drafting, and fiber cable routing and design for cable television multiple system operators. The company also provides civil and tower construction, lines and antenna installation, and foundation and equipment pad construction for wireless carriers, as well as equipment and material fabrication and site testing services; and installs and maintains customer premise equipment, including digital video recorders, set top boxes, and modems for cable television system operators.
4) Aixtron SE (AIXG)
Aixtron SE has a Current Ratio of 4.30, a Quick Ratio of 2.43, and a 5-Year Projected Earnings Per Share Growth Rate of 60.00%. The short interest was 3.20% as of 08/17/2012. AIXTRON Aktiengesellschaft manufactures and sells deposition equipment to the semiconductor industry. Its solutions are used by a range of customers to build components for electronic and opto-electronic applications, which are used in displays, signaling, lighting, computing, fiber optic communication systems, wireless and mobile telephony applications, and optical and electronic storage devices. The company offers production and research scale deposition systems for silicon semiconductor market applications capable of depositing material films on wafers; and a range of peripheral equipment and services, including products capable of monitoring the concentration of gases in the air and of cleaning the exhaust gas from metal organic chemical vapor deposition processes.
5) Griffon Corporation (GFF)
|:Industry||General Building Materials|
Griffon Corporation has a Current Ratio of 3.14, a Quick Ratio of 2.11, and a 5-Year Projected Earnings Per Share Growth Rate of 26.95%. The short interest was 3.89% as of 08/17/2012. Griffon Corporation manufactures home and building, technology related, and plastic products. Its Home & Building Products segment manufactures and markets residential, commercial, and industrial garage doors under the Clopay, America's Favorite Garage Doors, Holmes Garage Door Company, and IDEAL Door names to professional installing dealers and home center retail chains. This segment provides garage doors made primarily from steel, plastic composite, and wood; sells related products, such as garage door openers; and markets commercial sectional doors.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.