A methodical way to approach growth investing can help investors find companies with good prospects for future development. One such system comes from Louis Navellier's "The Little Book That Makes You Rich," which lists eight particular rules for choosing excellent growth stocks. These measures concentrate on earnings momentum, sales increases, profitability gains, and financial soundness to identify companies showing quickening business results.
Meeting the Little Book Criteria
NEW GOLD INC (NYSEARCA:NGD) shows clear agreement with Navellier's growth structure in several areas. The mining company's recent financial results display the kind of quickening measures that growth investors usually look for.
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Positive Earnings Revisions: Analysts have raised their next-quarter EPS estimates by about 6% over the last three months, showing increasing confidence in short-term results. This pattern of upward revisions is important because it frequently comes before actual earnings that exceed forecasts and mirrors better business conditions.
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Consistent Earnings Surprises: The company has exceeded earnings forecasts in each of the previous four quarters, with an average beat of 47.2%. This steady pattern of beating estimates implies management is successfully carrying out its business strategy and could result in more analyst upgrades.
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Strong Sales Growth:
- Quarterly revenue growth of 83.5% year-over-year
- Annual revenue growth of 44.2% These notable growth levels signal high demand for the company's products and services, a basic need for any growth stock.
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Improving Profitability: The operating margin has increased by 195% over the last year, showing better operational effectiveness. This improvement is especially significant considering the large revenue growth, indicating the company is growing its profits effectively.
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Good Cash Flow Generation: Free cash flow has increased by 388.8% each year, giving financial room for future investments, debt repayment, or possible shareholder returns. Good cash flow is necessary for funding internal growth without heavy dependence on outside financing.
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Quickening Earnings Momentum:
- Quarterly EPS growth of 212.5%
- Annual EPS growth of 309.1% The quickening from the last quarter's growth rate of 166.7% shows increasing earnings momentum, a main trait of successful growth stocks.
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High Return on Equity: With a ROE of 20.1%, the company produces good returns on shareholder capital. This measure of effectiveness shows good use of investor money to create profits.
Fundamental Assessment
According to ChartMill's detailed fundamental analysis, New Gold Inc. scores 6 out of 10 overall, with especially good results in profitability (7/10), growth (8/10), and valuation (8/10). The analysis points out the company's very good profitability measures and notable growth profile, paired with a good valuation that implies the stock could be fairly valued compared to its growth possibilities. Still, investors should be aware of some issues regarding financial condition, especially relating to liquidity ratios that are lower than industry competitors.
Investment Considerations
For investors using the Little Book system, New Gold represents an interesting example of growth investing ideas. The company's good agreement with several Navellier measures, especially concerning earnings momentum, sales growth, and profitability gains, implies basic business health. The mix of strong growth measures with fair valuation multiples creates a possibly interesting chance for investors focused on growth.
Those wanting to look into similar investment chances can view the full screening results based on Louis Navellier's strategy to find other companies displaying similar growth features.
Disclaimer: This article presents factual information for educational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results.
