Investors looking for a methodical way to find stocks with high growth frequently use established frameworks. One framework is described in Louis Navellier's "The Little Book That Makes You Rich," which lists eight basic rules for choosing excellent growth stocks. This method concentrates on firms with solid and improving financial results, especially in earnings, sales, and profit. The aim is to locate businesses where positive trends are seen in several measures, pointing to lasting growth possibility instead of temporary performance.
A recent filter using Navellier's eight rules has identified CNX Resources Corp (NYSE:CNX), an independent natural gas development and production company. The filter indicates CNX displays a number of the important traits that growth-focused investors applying this approach may find interesting.
Fitting the "Little Book" Rules
The center of Navellier's method is a multi-point list meant to sort for sound financial condition and positive trends. According to the given data, CNX Resources seems to satisfy or pass several of these important measures:
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Positive Earnings Revisions & Surprises: Analysts have notably increased their estimates, with the EPS forecast for the next quarter adjusted up by more than 13% in the last three months. This is a good positive sign, as analysts usually raise estimates only when they believe fundamentals are getting better. Also, CNX has a flawless history of surpassing expectations, beating EPS estimates in all of the last four quarters by an average of more than 48%.
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Improving Sales and Earnings Growth: The firm is displaying very high top-line trends. Quarterly sales growth (Q2Q) rose by about 347%, while year-over-year revenue growth is at a good 23.5%. More significantly, the method looks for improvement. CNX's quarterly EPS growth of 17.5% marks a large positive change from the drop of almost 15% reported in the same quarter a year earlier, showing a definite shift in earnings trends.
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Growing Profit and Solid Cash Flow: A main idea is that sales growth should lead to better profit. CNX's operating margin has grown greatly, increasing by 186% over the last year. This shows the firm is turning more revenue into profit more effectively. Also, the firm's free cash flow—an important gauge of financial soundness and adaptability—increased by almost 94% in the past year.
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Good Return on Equity: The method looks for firms that produce high returns on shareholder money. CNX's Return on Equity (ROE) of 14.6% is viewed as solid, putting it in the top group of its industry competitors and meeting the model's need for at least a 10% ROE.
Basic Condition and Price Context
Beyond the specific filter rules, a wider view of CNX's basic profile gives context. According to its detailed basic analysis report, the firm shows a mixed but interesting picture. It rates well on profit, with industry-best operating and profit margins. Its growth scores are also good, mirroring the solid past performance in revenue and EPS.
However, the report notes clear worries about financial condition, especially related to liquidity measures like its current and quick ratios. This indicates that while the firm is profitable and expanding, investors need to note its balance sheet setup. On price, CNX seems fairly valued compared to both its industry and the wider market, trading at a lower level on several common price-to-earnings and cash flow measures.
A First Step for More Study
It is key to remember that a filtering model is a first step for study, not a final judgment. The "Little Book" filter is built to find firms showing short-to-medium-term basic trends. CNX Resources' presence on this list shows it is demonstrating the type of improving financial performance the method aims to find. The combination of rising sales, growing margins, positive analyst revisions, and solid earnings surprises forms an interesting story for growth investors.
For investors wanting to review other firms that currently pass this multi-point growth filter, the complete list of outcomes is available here. As usual, any possible investment should be thought about within an individual's total portfolio plan and risk comfort, with a complete review of the firm's specific outlook and risks.
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Disclaimer: This article is for information only and is not financial advice, an endorsement, or a suggestion to buy, sell, or hold any security. The filtering method discussed uses past data and specific investment ideas, which may not fit all investors. You should do your own study and talk with a qualified financial advisor before making any investment choices.