In growth investing, few methods are as clear and established as the one Louis Navellier described in his 2007 book, The Little Book That Makes You Rich. The approach centers on finding companies with outstanding and speeding growth through eight defined, numerical rules. These rules aim to select stocks displaying positive earnings revisions and surprises, rising sales, widening margins, good cash flow, earnings growth, positive earnings momentum, and a high return on equity. The aim is to methodically locate businesses that are not only growing, but also doing so with better efficiency and profit, traits that frequently come before major stock price gains.
One firm that recently appeared from a filter using these ideas is DAVE INC (NASDAQ:DAVE), a digital banking platform serving consumers with limited options. A detailed look shows that DAVE matches well with many of Navellier's central ideas, offering a strong case for investors looking for high-growth possibilities.
Matching the "Little Book" Standards
The strength of Navellier's filter comes from its use of several factors, where a firm must perform well across many financial areas. DAVE's recent results show it meeting many of these standards with notable figures.
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Very High Earnings Growth & Momentum: This is likely where DAVE stands out most. The company's trailing twelve-month (TTM) earnings per share (EPS) has increased by a remarkable 1,161.54% year-over-year. Even more telling of positive momentum, a main part of the filter, is the quarterly comparison: EPS growth for the newest quarter jumped by 14,733.33% versus the same quarter last year. This greatly surpasses the prior quarter's year-over-year growth of 102.97%, showing the sharp speed increase Navellier looks for.
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Strong Sales Increase: Growth must also come from revenue. DAVE's revenue increase is strong, with TTM sales up 53.84% and the latest quarter's sales growing 63.03% year-over-year. This meets the filter's need for good and rising sales growth, showing the company's main services are achieving notable market acceptance.
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Positive Analyst Outlook (Revisions & Surprises): The method gives great importance to analyst actions as an early sign. DAVE has justified analyst trust, exceeding EPS estimates in 3 of the last 4 quarters by an average of 96.14%. Also, analysts have noticed, lifting their estimates for the coming quarter by 36.97% over the past three months. This mix of steady positive surprises and higher revisions is a clear sign of fundamental business health that may not yet be completely seen in forecasts.
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Rising Profit and Cash Flow: Navellier’s rules demand widening operating margins and good cash flow increase, indicators that sales growth is becoming real profit. DAVE does well here, with its operating margin growing by over 504% in the last year. Even more notable is the increase in free cash flow, which has risen by 4,294.42% year-over-year. This change to solid, cash-producing activities is a key development for any growth company.
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Outstanding Return on Equity: The last rule requires a high return on equity (ROE), which calculates how well a company creates profit from shareholder funds. DAVE's ROE of 50.37% is outstanding, ranking it near the best in its field and showing very effective use of capital.
Fundamental Condition and Valuation Setting
Apart from the specific filter standards, a wider fundamental review of DAVE shows a firm in a good financial state. According to ChartMill's detailed fundamental report, DAVE receives an overall score of 7/10. Its financial strength is rated a full 10, backed by a very solid balance sheet with minimal debt, very good liquidity ratios, and a high Altman-Z score indicating low risk of failure.
The growth score is a high 9, confirming the very high trends found by the filter. The main area for thought is in valuation. The stock's Price-to-Earnings (P/E) ratio seems high compared to others in its industry, which is typical for high-growth firms. However, this is somewhat balanced by a more acceptable forward P/E ratio and a low PEG ratio, which includes the company's very large expected earnings growth.
A Leading Example for Growth-Oriented Methods
DAVE INC shows a clear example of a firm that meets a strict, multi-factor growth filter like the one from The Little Book That Makes You Rich. It shows not just growth, but speeding growth across sales, earnings, and profit measures, all while keeping excellent financial health. The major upward revisions from analysts imply this speed may still be undervalued.
For investors using Navellier's method or similar growth-oriented strategies, DAVE illustrates the kind of profile they look for: a company reaching its operational peak with financial outcomes that are speeding up greatly.
Interested in locating other firms that match this growth type? You can investigate and adjust the live filter based on Louis Navellier's "Little Book" method here.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any security. Investing has risk, including the possible loss of original funds. Readers should do their own study and talk with a qualified financial advisor before making any investment choices.