FUTU HOLDINGS LTD-ADR (NASDAQ:FUTU) Excels in Navellier's Growth Stock Screen

Growth investing strategies often rely on identifying companies showing strong financial momentum and operational quality. One systematic approach, described in Louis Navellier’s "The Little Book That Makes You Rich," uses eight fundamental rules to find stocks with high growth potential. These criteria concentrate on earnings revisions, surprises, sales and earnings growth, margin expansion, cash flow strength, earnings momentum, and return on equity. By filtering for these traits, investors can find companies set for continued strong performance.

FUTU HOLDINGS LTD-ADR (NASDAQ:FUTU), a digital brokerage platform for global investors, recently appeared from a screen built on Navellier’s methodology. The company’s financial measurements align well with the eight rules, suggesting it may deserve attention from growth-focused investors.

Earnings Revisions and Surprises

A main point of Navellier’s strategy is that upward revisions in earnings estimates often come before price gains, as analysts change expectations based on improving company outlook. FUTU shows a significant 19.45% rise in the next quarter’s EPS estimates over the past three months, showing increasing optimism among analysts. Also, the company has reported positive earnings surprises in three of the last four quarters, with an average beat of 11.8%. Steady outperformance against expectations can lead to more estimate increases and investor trust.

Growth in Sales and Earnings

Rising growth in both revenue and earnings is key to finding companies in an expansion phase. FUTU’s performance here is strong:

• Year-over-year revenue growth: 66.35%
• Quarterly revenue growth: 69.73%
• Year-over-year EPS growth: 80.47%
• Quarterly EPS growth: 103.67%

These numbers not only meet but greatly surpass the usual limits used in growth screens, reflecting high demand for the company’s services and good execution.

Operating Margin and Cash Flow

Getting better at profitability and cash generation is important for maintaining growth without too much need for outside financing. FUTU’s operating margin grew by 19.55% over the past year, a sign of better efficiency. Even more notable is the company’s free cash flow growth of 580.56%, highlighting its skill at turning earnings into cash, a key sign of financial strength and flexibility.

Earnings Momentum and ROE

Navellier points out the value of speeding up earnings and high returns on equity. FUTU’s quarterly EPS growth sped up greatly from 8.81% a year ago to 103.67% recently, showing strong momentum. The company also has a return on equity of 23.77%, much higher than the minimum 10% level, showing good use of shareholder capital.

Fundamental Rating and Valuation

Based on ChartMill’s fundamental analysis report, FUTU gets a rating of 6 out of 10. The report points out very good profitability and high growth, balanced by some worries about financial condition, mostly connected to solvency measurements. Valuation looks acceptable compared to industry and market averages, particularly when considering the company’s high expected earnings growth.

Suitability for Growth Investors

FUTU is a good example of the type of stock Navellier’s method aims to find: a company with speeding up fundamentals, positive analyst opinion, and high quality of earnings. Its match with all eight rules suggests it may be set for ongoing growth, though investors should stay aware of industry-specific risks and valuation levels after recent price gains.

For readers wanting to look into other companies that meet these criteria, the screen used to find FUTU can be found here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consider their financial situation, risk tolerance, and investment objectives before making any decisions.