Growth investors are always looking for companies that show not only present achievement, but the essential force to maintain and increase that achievement. A methodical way to find these stocks was made common by Louis Navellier in his 2007 book, The Little Book That Makes You Rich. Navellier’s method is formed on eight particular rules made to sort for outstanding growth stocks, concentrating on earnings revisions, sales and profit increase, and financial condition. By using these standards, such as positive earnings surprises, quickening revenue increase, and widening margins, investors try to identify companies that are not only increasing but doing so in a productive and possibly underappreciated way.
Credo Technology Group Holding Ltd (NASDAQ:CRDO) stands out as a notable candidate when examined through this strict structure. The company, which creates high-speed connectivity solutions for data infrastructure, seems to be performing well in many areas that match closely with Navellier’s growth rules.
Match with the "Little Book" Standards
A search using Navellier’s eight rules points out several areas where CREDO shows notable force. The given information shows a company in a forceful growth period.
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Positive Earnings Revisions & Surprises: Analysts have greatly increased their estimates for CREDO’s next quarter, with the average EPS forecast changed upward by 51.83% over the last three months. This is a clear sign that experts following the company see bettering basics. Also, CREDO has a flawless history of surpassing forecasts, reporting four straight positive EPS surprises with an average exceedance of 33.04%. Steady overperformance makes the market reconsider future possibility, a main idea of the method.
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Very Strong Sales and Earnings Increase: The company is showing very high growth measures. Year-over-year revenue has jumped 224.17%, while quarterly sales increase is at a notable 272.08%. More significantly, earnings increase is even more marked, with EPS growing 713.64% over the last year and 857.14% on a quarterly basis. This sales and profit surge is the central driver for a growth stock’s rise.
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Widening Profitability and Firm Cash Flow: Growth is most worthwhile when it becomes more profitable. CREDO’s operating margin has widened greatly by 272.26% over the past year, showing the company is scaling productively. Also, its free cash flow—the essential source for funding activities and growth—has increased by over 5,456%. This pairing of margin widening and firm cash creation meets Navellier’s rules for financial quality and operational force.
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High Return on Equity (ROE): The method stresses productive use of shareholder capital. CREDO’s ROE of 16.48% is seen as firm, putting it in front of most of its competitors in the semiconductor equipment field and showing management is creating solid profits from the equity put into the business.
Basic Condition and Value Setting
A look at CREDO’s wider basic profile backs the image shown by the growth filter. The company gets a firm total basic rating of 7 out of 10. Its financial condition is a specific highlight, with an almost perfect score of 9. This is supported by a very strong balance sheet having no debt, very high liquidity measures, and an Altman-Z score that shows very low bankruptcy danger. For a growth company, this financial steadiness gives an important base to put money into new ideas without the weight of interest costs.
The growth rating of 8 confirms the momentum, with excellent past results and analyst forecasts for revenue and EPS to keep increasing at a yearly average above 46% and 52%, in that order. The main warning comes from value. The stock sells at a high trailing P/E ratio, which is common for companies in such a quick growth period. However, the forward P/E ratio is closer to the market, and a low PEG ratio implies the present price may be accounting for the unusual growth expected. You can see the complete, itemized separation in CREDO’s fundamental analysis report.
Is CREDO Suitable for Growth Investors?
For investors using a method like Navellier’s, CREDO Technology Group shows a standard example of a high-momentum growth stock. It meets the important points of upward analyst revisions, steady earnings surprises, and very strong, quickening increase in both sales and profits—all while bettering its margins and creating significant cash flow. Its clean balance sheet further lowers the risk of the investment idea.
It is significant to see that such very strong growth often has high values and natural instability, as the stock price is very reactive to any seen deceleration in its growth path. The present neutral long-term direction for the wider S&P 500 also implies a choosy market setting.
CREDO’s presence on this filter suggests it deserves a more detailed examination from growth-focused investors. For those wanting to see other companies that presently pass the same set of orderly growth filters, you can see the live filter results here: Louis Navellier's "Little Book" Growth Screen.
Disclaimer: This article is for information only and does not form financial guidance, a suggestion to buy or sell any security, or a support of any investment method. Investors should do their own study and think about their personal financial situation and risk willingness before making any investment choices.
