Investors are always looking for methods to find companies with high growth possibility before most of the market notices. One organized method is described in Louis Navellier's "The Little Book That Makes You Rich," which summarizes growth investing into eight basic rules. These rules center on earnings revisions, surprises, sales and earnings growth, widening margins, solid cash flow, and high returns on equity. The aim is to find businesses not only growing, but speeding up in a financially sound and profitable way. A recent filter using this method has identified Hecla Mining Co (NYSE:HL) as a candidate for more detailed review.
Matching the "Little Book" Rules
Hecla Mining's recent financial results show clear agreement with many of Navellier's important growth filters. The company is displaying the type of strong, speeding momentum the method aims to find.
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Positive Earnings Revisions & Surprises: A key part of the method is that analyst estimate changes can signal future movement. For HL, the average EPS estimate for the next quarter has increased by 50% over the past three months, a major upward change that hints at better fundamentals. Also, the company has surpassed analyst EPS estimates in three of the past four quarters, with an average surprise of 24%, showing a repeated ability to do better than forecasts.
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High Sales and Earnings Growth: The method requires solid and rising growth. HL's figures here are notable. Year-over-year revenue growth is 53%, while quarterly revenue rose 79% versus the same time last year. More notable is the earnings growth: EPS grew 360% over the last year, and the latest quarter saw a 450% increase compared to the year-ago quarter. Importantly, this current quarterly EPS growth is much higher than the 200% growth seen in the comparable quarter a year ago, pointing to positive earnings momentum and a faster rate.
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Widening Profitability and Solid Cash Flow: Growth is most useful when it leads to better profitability. HL's operating margin has widened by a remarkable 203% over the past year, showing the company is turning higher sales into profits more effectively. The method also highlights solid cash generation, and HL performs here too, with free cash flow growth over the past year above 8,000%, giving notable financial room to operate.
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High Return on Equity: The last rule looks for effective use of shareholder capital. HL's Return on Equity (ROE) of 12.4% meets the method's requirement, showing the company is producing a good profit from the equity investors have provided.
Fundamental Condition and Valuation Setting
An examination of Hecla Mining's wider fundamental picture gives important background. According to a detailed fundamental analysis report, HL gets a 6 out of 10 overall, with clear strengths in profitability and financial condition.
The company's profitability measures are a strength, with solid operating and profit margins that score well in the metals and mining industry. Financially, HL seems sound, with a good balance sheet shown by a low debt-to-equity ratio and very good liquidity ratios. The growth score is positive, mirroring the high past growth, although analysts expect a more measured speed of growth in the coming years.
On valuation, the situation is varied. While HL's Price-to-Earnings ratio seems high on its own, it is priced lower than many industry competitors based on future earnings and enterprise value measures. The company's solid recent profitability and growth may support a higher price for some investors.
A Candidate for Growth-Oriented Review
For investors using a method like Navellier's, Hecla Mining offers a notable example. The company currently meets many of the requirements for a high-growth stock, showing strong momentum in sales, earnings, and profitability widening. The large analyst estimate changes and repeated earnings beats further support the idea that positive fundamental changes may be happening.
It is important to recognize that such high growth rates, especially in a cyclical industry like mining, can be hard to maintain. The filter is made to spot possibility, not promise future results. Investors should review the company's longer-term view, commodity price risks, and execution challenges next to these solid short-term measures.
This analysis came from a stock filter based on "The Little Book That Makes You Rich" method. You can review the current results of this filter and find other possible candidates by viewing it here.
Disclaimer: This article is for information only and does not make up financial advice, an approval, or a suggestion to buy, sell, or hold any security. Investing includes risk, including the possible loss of principal. Always do your own research and think about talking with a qualified financial advisor before making any investment choices.