In the world of growth investing, few strategies have the lasting appeal of the systematic approach outlined by Louis Navellier in his book, The Little Book That Makes You Rich. The central idea is to find companies showing better and faster growth across several financial areas, from earnings and sales to profitability and cash flow. Navellier’s method turns this into eight specific rules, forming a quantitative filter meant to select stocks with the fundamental strength that frequently comes before major price gains. This structured system looks past simple growth measures, searching for companies where good trends are seen in earnings revisions, surprises, and how well they operate.
One stock currently appearing from such a filter is Hippo Holdings Inc (NYSE:HIPO), a technology-focused home protection and insurance company. A detailed look shows that HIPO matches well with several of Navellier’s important rules, presenting an interesting case for growth investors looking for companies during a notable operational recovery.
Matching Navellier's Growth Rules
Hippo’s recent financial results show the many-sided growth speed-up that Navellier’s strategy aims to find. The given data shows notable strength in key areas:
- Strong Earnings Momentum: The most notable number is the quarterly earnings per share (EPS) growth. HIPO reported a 662.7% year-over-year rise in its latest quarter, a sharp increase from the 70.1% growth seen in the same quarter a year before. This fits Navellier’s rule for positive earnings momentum, where faster growth is a clear sign of better business conditions.
- Solid Sales Growth: Revenue growth is good at both the quarterly and yearly levels. Sales grew 26.3% compared to the same quarter last year, while trailing twelve-month revenue went up by 34.5%. This meets the rule needing rising sales growth, a basic part of any company called a growth stock.
- Major Profitability Gain: Maybe one of the most positive signals is the increase of operating margins, which grew by 79.2% over the past year. This rule is important as it shows the company is not just increasing sales, but is doing so with more profit, changing revenue gains more effectively to net income.
- Good Cash Flow Creation: The company’s free cash flow grew by 90.3% over the past year. Navellier notes strong cash flow as it gives financial options, lowers need for outside money, and can support more internal growth, a key sign of financial soundness and longevity.
- High Return on Equity: HIPO’s return on equity (ROE) is 22.75%, much higher than the 10% minimum set in the filter. A high ROE means that management is creating large profits from the money shareholders have invested, a sign of an effective and well-managed growth company.
Beating Analyst Predictions
Beyond only financial numbers, Navellier’s strategy puts great focus on market feeling and predictions, which are often early signals.
- Positive Earnings Surprises: HIPO has exceeded analyst EPS predictions in three of the last four quarters, with an average surprise of a remarkable 215.4%. Steady positive surprises make the market look again at a company’s possibilities and often lead analysts to increase their future estimates.
- Large Earnings Revisions: This is just what has happened. Analyst estimates for HIPO’s next quarter EPS have been increased by 300% over the last three months. As Navellier states, upward revisions from usually careful analysts are a strong positive sign, suggesting they have convincing new information about the company’s short-term future.
Fundamental Rating and Valuation Setting
ChartMill’s fundamental analysis report for HIPO gives a wider setting, giving the stock a rating of 4 out of 10. This score shows a varied but interesting profile. The company’s growth score is a high 7/10, directly supporting the findings from the Little Book filter, with note of its strong past and expected future growth in both revenue and EPS. Its profitability score is lower at 3/10, pulled down by a past of net losses and negative operating cash flow, though it shows very good current measures like profit margin and ROE. The financial health score is neutral at 5/10, helped by a very strong cash position and no major debt, but affected by a weak Altman-Z score.
On valuation, the report points out a split: the stock seems very low-priced based on its trailing Price/Earnings ratio of 7.58, but high-priced on a forward-looking basis because of big growth expectations. This is common for companies at a fast earnings turning point. You can see the full, detailed breakdown in the HIPO Fundamental Analysis Report.
A Pick for the Growth-Focused Investor
Hippo Holdings shows the kind of company a Navellier-style filter is made to find: one showing strong, concurrent speed-up across several fundamental areas. It is displaying dramatic earnings growth, gaining profitability, good cash flow creation, and is regularly doing better than market predictions, leading to major analyst improvements. While its past financials show the marks of a growth-stage company, the current path suggests a possibly changing period.
For investors wanting to use this systematic growth strategy, HIPO works as a real example of how the rules select for particular fundamental strength. It is key to recall that this filter is a beginning for more study, not a list of buys. The market setting, competitive field, and total risk tolerance must always be thought about.
Find other companies currently passing this strict growth filter by looking at the Louis Navellier "Little Book" Screener.
Disclaimer: This article is for information and learning only. It is not meant as investment advice, a suggestion, or an offer to buy or sell any security. The analysis uses data thought to be dependable, but its correctness cannot be sure. Investing includes risk, including the possible loss of original money. You should do your own study and talk with a qualified financial advisor before making any investment choices.
