In growth investing, few methods are as clear and established as the one Louis Navellier described in his 2007 book, The Little Book That Makes You Rich. The approach centers on finding companies displaying better and quickening financial results measured by eight main rules. These measures, from rising earnings estimates to growing profit margins, aim to find stocks with good momentum before most of the market sees their possibility. A recent filter using this method has found a significant company in the metals and mining industry: Kinross Gold Corp (NYSE:KGC).
Fitting the "Little Book" Measures
Kinross Gold Corp, a major gold producer with activities in the Americas and West Africa, seems to match well with many of Navellier's central ideas. The method stresses present momentum and gain, and Kinross performs in several areas with its latest financial reports.
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Rising Earnings Estimates & Surprises: A key part of the method is that increases in analyst forecasts often come before stock price gains. For Kinross, the average EPS forecast for the coming quarter has increased by a large 36.4% over the past three months. Also, the company has not only met but regularly beaten forecasts, reporting a positive earnings surprise in all of the last four quarters, with an average beat of 26.6%.
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Quickening Gains in Sales and Earnings: Navellier’s filter searches for companies where gain is not only happening but speeding up. Kinross displays solid momentum here:
- Revenue increased 36.9% year-over-year and 42.9% quarter-over-quarter.
- Even more notable is the earnings speed-up. EPS rose 235% compared to the same quarter last year, a sharp rise from the 81.8% gain recorded in the earlier similar period. This clear positive earnings momentum is a main part of the method.
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Growing Profitability and Good Cash Flow: For a growth narrative to last, revenue gain must lead to profit strength. Kinross shows this clearly. The company's operating margin grew by 57.5% over the last year, showing it is turning more of its increasing revenue into operating profit. At the same time, its free cash flow—an important gauge of financial soundness and options—increased by a notable 87.2%.
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High Return on Equity: The last rule looks for effective capital users. Kinross’s return on equity (ROE) is 31.6%, much higher than the method's lowest limit of 10%. This shows the company is creating good profit from the equity provided by its shareholders.
Basic Soundness and Price Setting
Outside the specific filter measures, a wider view of Kinross's basics shows a company in good condition. According to a full basic analysis report, Kinross receives a total score of 7 out of 10, with special strength in profitability and financial soundness.
- Profitability is a strong point, with a score of 9/10. The company has industry-best margins and returns, including a profit margin of 33.9% and the already mentioned high ROE.
- Financial Soundness is also good at 8/10, backed by a firm balance sheet with acceptable debt and sound liquidity measures.
- Price setting shows a varied view, scoring 7/10. While its normal P/E ratio seems high, its forward P/E and enterprise-value-to-EBITDA ratios are lower than most of its industry competitors. The report states that its high profitability may support its price, and its low PEG ratio indicates the stock could be fairly valued when growth is factored.
- The main point of care is in the Growth group (4/10), where previous fast growth in EPS and revenue is predicted to slow, with analysts expecting small decreases in the coming years. This highlights the method's concentration on present momentum over long-term forecasts.
A Pick for Growth and Momentum Investors
Kinross Gold Corp’s success in the "Little Book" filter shows its present position as a company performing well in operations and finance. It represents the kind of stock the method finds: one with solid, measurable momentum in sales, earnings, and profitability, along with positive analyst opinion and high returns on capital. While the filter is basically driven and often linked to a longer-term, position-trading view, the good momentum numbers also make it a possible pick for investors with a shorter-term swing trading focus, particularly when paired with good technical patterns.
For investors wanting to see other companies that currently meet this strict growth filter, you can see the full and current list of findings here.
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Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer or request to buy or sell any securities. The "Little Book" method is a model using historical measures, and past results do not guarantee future outcomes. Investors should do their own complete study and think about their personal financial situation and risk comfort before making any investment choices.
