Growth investing strategies often look for companies that are not only growing, but doing so with increasing speed and better financial efficiency. One method for finding such stocks is described in Louis Navellier's "The Little Book That Makes You Rich," which lists eight basic rules for choosing leading growth stocks. These rules concentrate on positive earnings revisions and surprises, rising sales, widening margins, solid cash flow, earnings growth, positive earnings momentum, and a high return on equity. A recent screen based on these ideas has identified Credo Technology Group Holding Ltd (NASDAQ:CRDO) as a notable candidate for investors using this method.
A Good Fit for the "Little Book" Criteria
Credo Technology, a creator of high-speed connectivity solutions for data infrastructure, seems to fit well with Navellier's growth filters. The company's recent financial results display the fast growth and positive momentum the strategy aims to find.
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Positive Earnings Revisions & Surprises: Analyst opinion has become notably positive. The consensus EPS estimate for Credo's next quarter has been raised by 56.7% over the last three months, a clear sign analysts view the fundamentals as improving. Also, the company has a perfect history of beating expectations, reporting four consecutive positive earnings surprises with an average beat of 33%. Consistent surprises often lead analysts to raise future estimates, which can be a significant factor for stock prices.
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Notable Sales and Earnings Growth: The heart of any growth story is revenue expansion, and Credo's is notable. Year-over-year revenue growth is 224.2%, while quarterly sales jumped 272.1% compared to the same period last year. This sales increase is reflected in profitability: year-over-year EPS growth is a remarkable 713.6%, and quarterly EPS grew by 857.1%. For a growth strategy, these numbers show a company that is expanding quickly and using that size productively.
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Widening Profitability and Solid Cash Flow: Growing sales alone is insufficient; a good growth company enhances its profitability as it grows. Credo's operating margin has widened significantly, growing by 272.3% over the past year. This shows meaningful operating leverage. Also, the company's free cash flow—important for funding internal growth—increased by over 5,456% in the past year, showing a sound and getting better financial position.
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Positive Earnings Momentum and High ROE: The "Little Book" strategy looks for increasing speed, not just growth. Credo's current quarterly EPS growth of 857.1% is much higher than the 600% growth from the similar quarter a year ago, showing strong positive momentum. Finally, the company achieves a solid return on equity (ROE) of 16.5%, above the strategy's 10% minimum and showing productive use of shareholder capital.
Fundamental Condition and Valuation Setting
A wider fundamental review of Credo Technology, as described in its detailed ChartMill report, gives the stock a score of 7 out of 10. The report points out a company in sound financial condition with a clean balance sheet—having no debt and holding very good liquidity ratios. Its profitability measures, including profit margin and operating margin, are near the best within the competitive semiconductors industry.
The main area for thought is valuation. The stock trades at high earnings multiples, which is common for companies showing very fast growth. However, the analysis states that its low PEG ratio—which includes its huge expected earnings growth—and its solid growth profile might support the premium. The company is anticipated to maintain high growth, with analyst forecasts indicating yearly EPS growth of about 47% and revenue growth of 42% in the next few years.
A Leading Candidate for Growth Screening
Credo Technology Group presents a clear example of a company currently meeting a strict growth stock screen built on Louis Navellier's method. Its financial outcomes meet every requirement: climbing sales and earnings, widening margins, significant cash generation, and positive analyst revisions. While its valuation needs thoughtful review, the fundamental momentum is clear. For investors using a growth-oriented strategy, CRDO represents the kind of active company these screens are meant to identify.
Investors curious about finding other companies that currently meet this "Little Book" growth screen can view the complete list of results here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any securities. Investing involves risk, including the potential loss of principal. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
