A systematic method for growth investing can help investors find companies with strong financial momentum. One such system comes from Louis Navellier's "The Little Book That Makes You Rich," which lists eight basic rules for choosing excellent growth stocks. This plan centers on finding companies that show positive earnings revisions, consistent earnings surprises, increasing sales growth, widening profitability, strong cash flow creation, earnings growth, positive earnings momentum, and high returns on equity. When used with a stock screener, this method can identify companies like Agnico Eagle Mines Ltd (NYSE:AEM) that display several traits connected with growth investing ideas.
Earnings Revisions and Surprises
The first two rules in Navellier's system stress the value of analyst confidence and steady performance beating forecasts. Agnico Eagle shows strength in both areas:
- EPS revisions: Analyst estimates for the next quarter have been moved up by 26.86% over the last three months
- Earnings surprises: The company has exceeded EPS estimates in all of the last four quarters
- Average beat: The average earnings surprise over this period is 10.59%
These numbers show that analysts are becoming more positive about the company's future, while management has regularly produced results that surpass forecasts. This pairing often points to strong operational performance and possibility for future price gains.
Growth Metrics
Sales and earnings growth are central to any growth investing plan, and Agnico Eagle displays notable widening across several measures:
- Revenue growth: Year-over-year revenue rose by 32.28%, while quarterly revenue grew 35.61%
- EPS growth: Year-over-year earnings per share jumped 106.69%, with quarterly EPS up 81.31%
- Earnings momentum: Current quarterly EPS growth of 81.31% is higher than the previous comparable quarter's growth of 64.62%
This speeding-up growth pattern fits well with Navellier's focus on companies that are not only growing, but growing at a faster pace. The large gains in both top-line revenue and bottom-line profitability indicate the company is successfully enlarging its operations.
Profitability and Cash Flow
Widening operating margins and strong cash flow creation point to efficient operations and financial soundness:
- Operating margin growth: Rose by 54.51% over the last year
- Free cash flow: Jumped 350.06% year-over-year
- Return on equity: Is at 13.13%, much higher than the 10% level needed by the plan
The major gain in operating margins indicates the company is operating more effectively as it expands, while the large free cash flow increase gives financial room for more growth, debt payment, or shareholder benefits.
Fundamental Assessment
According to ChartMill's detailed fundamental analysis, Agnico Eagle gets a good rating of 7 out of 10. The analysis points out several positive attributes:
- Excellent profitability measures, with profit margins and operating margins in the top 6% of industry competitors
- Strong financial condition with very good solvency ratios and workable debt levels
- Notable historical growth in both revenue and earnings
- Fair valuation compared to industry competitors despite strong results
The report states that while future growth projections show some slowing from current high levels, the company's very good profitability and financial condition create a good base for ongoing achievement.
Investment Considerations
While Agnico Eagle displays several traits liked by growth investors, a few elements need thought. The company works in the gold mining industry, which brings commodity price changes and operational risks common to extraction businesses. Also, the fundamental analysis notes that while historical growth has been very good, analyst forecasts suggest some slowing in future growth rates. However, the company's strong cash flow creation, widening margins, and consistent earnings surprises offer balancing positives.
Investors curious about finding more companies that fit the "Little Book" rules can view the full screening results to find other possible choices that match this growth investing system.
Disclaimer: This article presents factual information about Agnico Eagle Mines Ltd and its connection with a specific investment system but does not constitute investment advice. Investors should perform their own research and consider their personal financial situations before making investment decisions. Past performance does not guarantee future results, and all investments carry risk including potential loss of principal.
