In the field of growth investing, few methods are as simple and established as the one Louis Navellier described in his 2007 book, The Little Book That Makes You Rich. The center of Navellier’s method is a strict, numbers-based filter constructed on eight basic rules meant to find companies displaying better and speeding up growth. These rules look at good earnings revisions and surprises, increasing sales and margins, solid cash flow, good earnings growth, favorable earnings momentum, and a high return on equity. The aim is to methodically locate stocks where business foundations are not only good, but clearly getting better, indicating a chance for major price gains. A new use of this filter has pointed to Comfort Systems USA Inc (NYSE:FIX) as an interesting candidate that seems to fit these strict standards.
Fitting the Eight Rules of Growth
A detailed look at Comfort Systems USA, a countrywide supplier of mechanical and electrical contracting services, shows how its new results match Navellier’s ideas. The company’s financial numbers tell a story of forceful, wide-reaching increase.
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Positive Earnings Revisions & Surprises: Analysts have been steadily lifting their forecasts for FIX, an important optimistic sign in Navellier’s system. The average EPS estimate for the coming quarter has been lifted by 19.35% over the past three months. Also, the company has a flawless history of surpassing forecasts, beating EPS estimates in all of the past four quarters by an average of 25.70%. Steady positive surprises often make analysts reassess future growth, starting a good cycle for the stock.
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Speeding Up Sales and Profitability: The company is providing outstanding top-line increase, with revenue for the past quarter jumping 35.24% year-over-year and trailing twelve-month (TTM) revenue higher by 27.71%. Importantly, this sales increase is turning into even quicker profit growth. The operating margin has increased by a notable 36.11% over the last year, showing the company is growing efficiently and making more profit on each dollar of sales.
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Solid Cash Flow and Earnings Growth: Financial strength and shareholder returns are highlighted by a 54.98% year-over-year increase in free cash flow, giving the company plenty of means for new investment or shareholder returns. Earnings growth is very strong, with TTM EPS higher by 80.72% and the newest quarter’s EPS rising 101.71% compared to the same time last year.
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Favorable Earnings Momentum and High ROE: Maybe most telling of a forceful growth path is the existence of earnings speed-up. The present quarterly EPS growth of 101.71% greatly exceeds the growth rate from the same quarter a year before (49.27%), showing favorable momentum. Lastly, the company produces an excellent return on equity (ROE) of 37.50%, indicating it is very good at creating profits from shareholder money.
Basic Health and Valuation Setting
Apart from the exact "Little Book" standards, a check of Comfort Systems USA’s wider basic situation, as explained in its detailed ChartMill analysis, shows a company in good health. The report gives FIX a high total basic rating of 8 out of 10, noting outstanding profitability and good financial health. The company’s margins are top in the industry and growing, while its balance sheet is firm with little debt worry.
The main item for investors to think about is valuation. The stock sells at high earnings multiples, with a P/E ratio much above the wider market average. Still, this higher price is likely backed by the company’s unusual growth rates, high profitability, and fine return on capital. The valuation score in the basic report is neutral, meaning the price could be reasonable given the basic growth, but it stays a key item for investors to watch.
A Top Candidate for Growth Filtering
For investors using a method like Navellier’s, Comfort Systems USA shows a classic example of a company working very well. It is not only increasing; it is speeding up across important financial areas that have in the past linked with good stock results. The combination of higher analyst revisions, steady earnings beats, growing margins, and forceful cash flow creation forms an interesting basic story.
It is good to note that this filter is a beginning for more study, not a list of stocks to buy. The "Little Book" method is made to find possibility, and FIX’s numbers indicate it deserves a detailed review from growth-focused investors. Market situations, including the present neutral long-term but good short-term direction for the S&P 500, should also be included in any investment choice.
Interested in locating other companies that pass this strict growth filter? You can review the live filter and its present outcomes here.
Disclaimer: This article is for information only and does not make up financial advice, a suggestion, or an offer to buy or sell any securities. The "Little Book That Makes You Rich" method is one of many investment approaches, and past results of a filtering way are not a sign of future outcomes. Investors should do their own full research and think about their personal financial position and risk comfort before making any investment choices.
