Credo Technology Group Holding Ltd (NASDAQ:CRDO) Passes Rigorous Growth Screen

Growth investors looking for high returns frequently use systematic methods to find companies with solid expansion prospects. One established method is from Louis Navellier's "The Little Book That Makes You Rich," which lists eight fundamental rules for choosing growth stocks. This approach concentrates on companies showing positive earnings revisions, strong surprises, increasing sales and earnings growth, widening margins, solid cash flow, and high returns on equity. A recent screen using these strict criteria has found Credo Technology Group Holding Ltd (NASDAQ:CRDO) to fit the strategy's strict requirements.

Meeting the Eight Growth Criteria

Credo Technology's financial results match well with Navellier's growth framework, showing several positive traits that growth investors usually look for.

Earnings Revisions and Surprises Analyst sentiment has been improving for Credo, with next-quarter EPS estimates increased by 27.7% in the last three months. This large revision shows rising confidence in the company's short-term future. Also, Credo has shown a notable history of beating estimates, reporting positive earnings surprises in each of the past four quarters with an average beat of 32%. Steady outperformance frequently causes analysts to raise future estimates, generating positive momentum.

Increasing Growth Metrics The company's growth path shows notable strength in both revenue and profit measures:

• Quarterly revenue growth of 273.6% year-over-year
• Annual revenue growth of 175.8%
• Quarterly EPS growth of 1,200%
• Annual EPS growth of 643.8%

These high growth rates greatly surpass Navellier's screening limits and point to solid business momentum. The acceleration concept is clear when looking at the current quarterly EPS growth of 1,200% next to the previous comparable quarter's growth of 233.3%.

Profitability and Cash Generation Credo shows impressive operational efficiency with operating margin growing by 212.9% over the last year, well above the strategy's need. This growth means the company is increasing sales while becoming more profitable. Free cash flow production has been notable, rising by 1,078.7% each year, giving financial room to support future expansion plans. Return on equity is 16%, above the 10% minimum and showing good use of shareholder money.

Fundamental Assessment Overview

According to ChartMill's detailed fundamental analysis, Credo gets an overall rating of 7 out of 10, placing it as an interesting option for growth-focused investors. The company displays very good financial health with no debt and solid liquidity ratios. While profitability has varied in the past, current margins are some of the best in the industry. Valuation shows a mixed view with high standard multiples balanced by good growth justification from a positive PEG ratio.

The analysis points out Credo's notable growth profile, with revenue growing at 52% each year in recent times and predicted to keep going at 42.1% in the future. EPS growth forecasts of 47.4% annually support the argument for future price increases. The company works in the semiconductor equipment industry, creating connectivity solutions for data infrastructure markets, placing it well for continuing digital transformation trends.

Investment Considerations

For investors using growth strategies like Navellier's method, Credo is an interesting example of weighing notable growth measures against valuation questions. The company's perfect performance against the eight growth criteria, along with its good industry position, makes it worth looking at for growth-targeted portfolios. However, investors should watch if current growth levels can be maintained and how valuation measures change as the company develops.

Readers wanting to find more companies that meet these strict growth criteria can review the full screening results to find other possible opportunities.

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Disclaimer: This article provides factual information and analysis for educational purposes only and is not investment advice, a recommendation, or an endorsement of any security. Investors should perform their own research and talk to financial advisors before making investment decisions. Past performance is not a guarantee of future results, and all investments have risk, including the possible loss of principal.