FUTU HOLDINGS LTD-ADR (NASDAQ:FUTU) Shows Strong Growth and Earnings Momentum

A systematic method for finding promising growth stocks can give investors a structured process for discovering companies with strong potential. One such system comes from Louis Navellier's "The Little Book That Makes You Rich," which lists eight specific rules for choosing superior growth stocks. These rules concentrate on earnings momentum, sales expansion, margin improvement, and financial strength to identify companies showing accelerating business performance.

Futu Holdings Ltd-ADR (NASDAQ:FUTU) has appeared as a candidate fitting these strict screening requirements. The digital brokerage platform provider shows notable characteristics across several growth areas that match Navellier's method for finding companies with strong momentum.

Earnings Momentum and Revisions

The Little Book strategy gives significant importance to earnings momentum, especially positive earnings revisions and surprises, as these often come before price increases. FUTU shows notable strength in this area:

• EPS estimates for the next quarter have been adjusted upward by 380% over the past three months
• The company has reported positive earnings surprises in three of the last four quarters
• Average earnings surprise over the past four quarters is at 11.8%

These measurements show that analysts are regularly underestimating FUTU's earnings capability, leading to upward adjustments as the company continues to beat expectations. This pattern of positive surprises often creates a beneficial cycle where improving sentiment leads to further price momentum.

Strong Growth Measurements

Navellier's method requires companies to show solid growth in both sales and earnings, with speeding up trends being especially valued. FUTU's growth profile is particularly strong:

• Quarterly revenue growth of 69.7% year-over-year
• Annual revenue growth of 66.4% over the trailing twelve months
• Quarterly EPS growth of 103.7% year-over-year
• Annual EPS growth of 80.5% over the trailing twelve months

The speed-up in quarterly EPS growth from 8.8% in the previous comparable quarter to the current 103.7% shows the earnings momentum that growth investors look for. This kind of acceleration often points to improving operational efficiency or market share gains.

Profitability and Efficiency Gains

Growing operating margins and strong return on equity are key parts of the Little Book strategy, showing efficient operations and effective capital use. FUTU performs well in these areas:

• Operating margin growth of 19.6% over the past year
• Return on equity of 23.8%, notably above the minimum 10% level
• Free cash flow growth of 580.6% each year

The growing operating margin suggests the company is increasing revenue faster than costs, creating operating leverage that helps the bottom line. The high return on equity shows efficient use of shareholder money, while the strong free cash flow growth gives financial room for future investments.

Fundamental Assessment Summary

According to ChartMill's detailed fundamental analysis, FUTU gets a solid rating of 6 out of 10. The analysis points out several main strengths together with some areas of concern. The company shows very good profitability measurements, with excellent margins that are some of the best in the capital markets industry. Growth remains solid across both historical and forecasted measurements. However, the analysis mentions some worries about financial health, especially related to Altman-Z scores that indicate higher bankruptcy risk compared to industry norms. Valuation seems fair given the growth profile, with forward P/E ratios looking good next to broader market averages.

Investment Points

For investors using the Little Book method, FUTU presents an interesting example in growth investing. The company shows several features that Navellier identifies as signs of superior growth stocks, particularly in the areas of earnings momentum, sales expansion, and profitability gains. The mix of strong revision trends, speeding up growth rates, and growing margins creates a notable profile for growth-focused strategies.

The present market situation, with the S&P500 showing a positive short-term trend next to neutral long-term momentum, may give good conditions for growth strategies like the Little Book method. Investors looking for more candidates found through this method can review the full screening results to find other companies meeting these strict growth rules.

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Disclaimer: This article is for informational purposes only and does not constitute investment advice of any kind. The information contained herein should not be interpreted as a recommendation to buy, sell, or hold any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.