For investors looking for a methodical way to find companies with high growth, the principles in Louis Navellier's "The Little Book That Makes You Rich" offer a strong framework. The method centers on eight main rules meant to find stocks with better earnings momentum, faster sales, increasing profitability, and sound financial condition. By filtering for these particular fundamental factors, investors try to find companies that are not only growing, but whose growth is speeding up and being recognized by the market. A recent use of this filter has identified IAMGOLD CORP (NYSE:IAG) as a stock that now matches this growth-oriented method.
Match with the "Little Book" Growth Rules
IAMGOLD's latest financial results show a solid match with many of Navellier's central rules. The given data indicates very high growth and good momentum in important measures.
Positive Earnings Revisions & Surprises A key part of the method is finding companies where analyst opinion is getting better. IAMGOLD shows a large upward revision, with the average EPS estimate for the next quarter increased by 29.25% over the past three months. This implies analysts are becoming more confident in the company's short-term outlook. Also, the company has a history of surpassing forecasts, beating EPS estimates in three of the past four quarters by an average of 22.85%. Regular positive surprises can make analysts repeatedly raise future estimates, starting a pattern of increasing expectations that can drive the stock price.
Very High Sales and Earnings Growth The filter needs solid and speeding growth. IAMGOLD's numbers here are especially notable:
- Sales Growth (Q2Q): 131.56%
- Sales Growth (Year-over-Year): 74.70%
- EPS Growth (Q2Q): 600.00%
- EPS Growth (Year-over-Year): 123.64%
These numbers not only reach the method's minimum levels but go well beyond them, pointing to a time of major operational increase. The huge quarter-over-quarter EPS growth also meets the rule for Positive Earnings Momentum, as it greatly exceeds the growth rate from the same quarter a year earlier (66.67%).
Increasing Profitability and Sound Cash Flow Growth is most useful when it leads to better profitability. IAMGOLD's Operating Margin increased by 29.85% over the last year, showing the company is turning more revenue into operating income more effectively. This rising margin is a main indicator of operational force and pricing ability. Also, the company's Free Cash Flow rose by a remarkable 1,277.67% over the past year. Sound and increasing free cash flow gives financial room to support more growth, reduce debt, or give capital to shareholders without needing outside funding.
High Return on Equity The last rule stresses efficient use of shareholder capital. IAMGOLD's Return on Equity (ROE) of 15.85% easily goes above the method's minimum level of 10%. This shows the company is producing a good profit from the equity put into the business.
Fundamental Condition and Valuation Setting
Beyond the specific filter rules, a look at IAMGOLD's wider fundamental picture gives needed setting. According to its detailed fundamental analysis report, the company gets an overall score of 7 out of 10, with special force in Profitability and Health.
- Profitability: The company scores an 8 here, with notable measures including an Operating Margin of 38.87% and a Return on Invested Capital (ROIC) of 16.86%, both placed in the high group of its Metals & Mining industry group. Margins have shown clear gain in recent years.
- Financial Health: With a score of 7, IAMGOLD keeps a solid balance sheet. It has a workable Debt/Equity ratio of 0.17 and an Altman-Z score of 6.30, showing low short-term bankruptcy danger. The report states the company has no remaining debt.
- Valuation: The stock gets a Valuation score of 8. While its own P/E ratio may seem high, it is priced low relative to both its industry group and the wider S&P 500. Main ratios like Price/Free Cash Flow and Enterprise Value/EBITDA are in appealing percentiles compared to the industry.
The main warning stated in the report is in the Growth group (score 5). While past growth has been extraordinary, analyst forecasts for future EPS growth have become negative, suggesting the present very high speed may not continue long-term. This highlights the need to watch these momentum indicators carefully, as directed by the growth investing method.
A Pick for Growth-Oriented Filters
IAMGOLD CORP presents a strong example of a company now showing the potent mix of elements looked for by the "Little Book" method: rising earnings and sales, upward analyst revisions, increasing margins, and solid cash production. Its sound basic profitability and healthy balance sheet give a base for this growth. For investors using this methodical approach, IAG stands for the kind of high-momentum pick the filter is made to find.
It is key to recall that such filters are a beginning for more study, not a final action signal. The different view between excellent past performance and weaker future earnings forecasts stresses the need for ongoing review.
Want to find other stocks that now pass this growth-oriented filter? You can view the live results and change the rules using the Louis Navellier "Little Book" Screener.
Disclaimer: This article is for information only and does not make up financial advice, a suggestion, or an offer to buy or sell any security. Investing has risk, including the possible loss of principal. Readers should do their own study and talk with a qualified financial advisor before making any investment choices. The performance data and filters mentioned are based on past outcomes, which are not a guide for future returns.
