4 Fast Growers At A Reasonable P/E

Includes: BKNG, BWLD, OC, T
by: Hedgefund Manager

In his book "One Up on Wall Street", Peter Lynch categorizes securities into six groups by story: slow growers, stalwarts, fast-growers, cyclicals, turnarounds, and asset opportunities. Of these six, he states the biggest gains will come from the fast-growers, those that grow 20%+ per year. Of course, the market is constantly searching for securities with high growth potential, so fast-growers valuations tend to be quite rich.

I ran a screen for companies with high long-term growth forecasts (20%), low PEG ratio (less than 1.2), and analyst upside greater than 25%. Four securities that stood out are Buffalo Wild Wings (BWLD), Direct TV (NYSE:DTV), Owens Corning (NYSE:OC) and priceline.com (PCLN):


P/E (ttm)

LTG (5-year)

Price (12/14/11)

Analyst Price Target

Buffalo Wild Wings




















Buffalo Wild Wings operates casual dining restaurants that serve buffalo wings and beverages. The restaurants are popular among sports fans and sell-side analysts: analysts' 12-month upside is 25%. With 12-month sales of $727 Million and a market cap of $1.1 Billion, the chain has room to grow through expansion of new stores. Buffalo Wild Wing's earnings grew at 33% year-over-year in the most recent quarters. Sports fans continued to dine at BWW, despite the bleak economy in 2011.

DirectTV provides digital television in North and South America, offering 160 national high-definition television channels to its 28 million subscribers. DirectTV is another favorite of sports fans, with its exclusive NFL Sunday Ticket package. Analysts forecast earnings will increase 24% annually for the next 5 years, and their price target is 22% above current levels.

Owens-Corning is an industrial goods manufacturer, providing a wide range of composite and building materials across the world. It is a key materials supplier to a wide range of end-use applications: roofing shingles, pips, sporting goods, defense, autos, and so on. Quarterly earnings more than doubled to 113% year-over-year, and analysts expect earnings will increase 26% over the next 5 years. Consequently, analyst's price target is 49% above its current price.

priceline.com is an online exchange, providing online travel services worldwide. While US consumers are familiar with Priceline's "Name Your Own Price" offering, the growth opportunity is through its international brand, booking.com. The European travel market is highly fragmented, and booking.com has had success signing on the numerous independent hotels across Europe and Asia. Despite all the concerns over the European Union, growth has been strong at priceline. Year-over-year earnings more than doubled to 110% during the most recent quarter, and analysts expect earnings to grow 26% for the next 5 years as the booking.com continues to gain share in the relatively uncontested international markets. Analysts' price target is 40% above recent closing prices.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.