For investors looking for a methodical way to find stocks with high growth, the approach described in Louis Navellier's "The Little Book That Makes You Rich" presents a strong framework. The plan is based on eight basic rules meant to find companies showing better earnings momentum, faster sales, growing profitability, and sound financial condition. By searching for these particular numerical measures, investors try to locate stocks set for major price gains. A current use of this search has pointed to CorMedix Inc (NASDAQ:CRMD) as a candidate that deserves more study.
A Leader on Important Growth Measures
CorMedix, a pharmaceutical company working to bring its main product DefenCath to market to prevent catheter-related bloodstream infections, displays very strong growth measures that match well with Navellier's main ideas. The company's latest financial reports reveal a sharp speed-up, a main sign the approach tries to find.
- Very Strong Sales and Earnings Growth: The most notable numbers are in revenue and profit expansion. Yearly revenue growth is at a remarkable 1,648%, while sales for the last quarter rose over 810% from the year before. Even more notable is the quarterly earnings per share (EPS) growth of 2,620%, with yearly EPS growth above 354%. This meets Navellier's rules for rising sales and earnings growth, which are essential for any real growth stock.
- Strong Earnings Momentum and Surprises: The approach focuses greatly on positive earnings changes and surprises as signs of business strength exceeding predictions. CorMedix does very well here, with analysts increasing their estimates for the next quarter by more than 47% in the past three months. Also, the company has exceeded EPS estimates in each of the past four quarters, with an average surprise above 54%. Steady positive surprises often lead analysts to keep raising future estimates, building a positive pattern for the stock price.
- Growing Profitability and Sound Returns: Real growth means not only more sales, but also more efficient operations. CorMedix's operating margin has grown by over 111% in the last year, showing the company is growing with profit. This growth is important, as it shows cost control is matching fast revenue gains. Also, the company has a Return on Equity (ROE) of 43.4%, well above the approach's lowest limit of 10%. A high and getting better ROE indicates management is creating significant profit from shareholder money.
Financial Condition and Valuation Setting
Beyond the pure growth filters, a look at CorMedix's wider financial picture gives needed background. The company's fundamental score of 6 out of 10 shows a varied but hopeful view. Its profitability measures are now strong, with top industry operating and profit margins, though it is key to remember these come after years of losses as the company funded development. Financially, the company has no debt, a major plus for stability, though its cash ratios are about average for the industry.
Maybe most significant is the valuation. Even with the very high growth rates, CorMedix sells at a Price/Earnings (P/E) ratio of only 5.1 and a forward P/E of 4.2. This is very low compared to both the wider S&P 500 and other pharmaceutical companies. This mix of extreme growth and low price is uncommon and fits with the growth-at-a-reasonable-price (GARP) thinking that often supports successful growth investing. For a complete review, you can see the full fundamental analysis report for CRMD.
Points for Growth Investors
While the "Little Book" search successfully finds companies with strong short-term momentum, investors should think about the complete story. CorMedix's situation is now one of a commercial-stage biopharma company starting its first product. The recent very high growth rates are starting from a very small base, and the main test will be continuing and handling this growth path over the next few quarters. The company's future is closely linked to the successful market acceptance and use of DefenCath. Also, the search uses reported past results, keeping these unusual growth and margin measures will be vital for continued positive momentum.
The search that found CorMedix is made to locate stocks showing the specific earnings and sales speed-up Louis Navellier's study links with better market performance. If you want to look at other companies currently passing this strict growth search, you can find the live search template here: Little Book That Makes You Rich Screen.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer or request to buy or sell any securities. The information given is based on supplied data and should not be the only reason for any investment choice. Investing has risk, including the possible loss of the original investment. Always do your own research and think about talking with a qualified financial advisor before making any investment choices.
