New Gold Inc (NYSEARCA:NGD) Passes Key Growth Filter with Strong Earnings Momentum

Investors looking for a methodical way to find stocks with high growth frequently use proven methods. One framework comes from Louis Navellier's "The Little Book That Makes You Rich," which summarizes growth investing in eight main rules. These rules center on earnings momentum, sales increases, profit gains, and solid returns on capital. The aim is to find companies not only growing, but speeding up their growth in a financially responsible way. A recent filter using these ideas has identified an interesting possibility in the mining industry: New Gold Inc (NYSEARCA:NGD).

A Filter for Speeding Growth

The "Little Book" method uses a model with several factors meant to identify companies in a strong growth period. The eight rules stress positive earnings changes and surprises, speeding sales and earnings, widening profit margins, good cash flow production, and a high return on equity. The reasoning is simple: companies that regularly beat forecasts and better their financial efficiency are often valued higher by the market. The filter used to locate New Gold Inc applies particular, measurable criteria for each rule, producing a short list of possible growth choices.

How New Gold Inc Fits the Rules

An examination of New Gold's recent financial reports shows a company displaying many of the fast growth traits the filter aims to find. The given data shows clear agreement with Navellier's rules:

• Positive Earnings Changes & Surprises: Analysts have increased their EPS forecast for the next quarter by 10.58% in the past three months, a definite sign of better outlook. Also, the company has reported a positive earnings surprise in all of the last four quarters, with an average beat of 47.2%. Steady outperformance makes the market reconsider future prospects.
• Fast Sales and Earnings Growth: The company is displaying major momentum in revenue and profit. Revenue increased 44.19% year-over-year and a notable 83.53% quarter-over-quarter. Even more notable is the EPS growth, which jumped 309.09% over the last year and 212.5% in the most recent quarter. This is the heart of growth investing, finding companies where the business is getting larger quickly.
• Widening Profitability and Good Cash Flow: Growth is most useful when it becomes more profitable. New Gold's operating margin growth has widened by 195.03% over the past year, showing the company is turning more of its higher sales into profit. At the same time, free cash flow, a company's essential resource, has increased by 388.85%, supplying resources for new investment or lowering debt.
• Earnings Momentum and High Return on Equity: The filter looks for speeding momentum, not just growth. New Gold's current quarterly EPS growth (212.5%) is much higher than its growth rate from the same quarter a year earlier (166.67%), confirming a speeding trend. Lastly, the company reports a Return on Equity (ROE) of 20.11%, showing effective use of shareholder money to create profits, which meets the method's need for high ROE.

Fundamental Condition and Valuation Setting

Beyond the specific filter measures, a wider view of New Gold's fundamental profile shows a varied but notable picture. According to ChartMill's study, the company has an overall fundamental score of 6 out of 10. Its strong points are clear in profitability and growth, with high marks for return on assets, equity, and invested capital. The growth study supports the filter's results, noting "strong growth" and a speed increase in both earnings and revenue patterns.

However, the study notes worries about financial condition, mainly linked to liquidity. The company's current and quick ratios are below 1.0, indicating possible difficulties in meeting near-term debts, a typical feature in industries like mining that use a lot of capital and are in a growth period.

On valuation, the image is detailed. While the standard P/E ratio seems high, it is low compared to the metals and mining industry. More future-focused measures, like the Price/Forward Earnings ratio of 7.18, suggest the market may be pricing the stock at a large reduction to its expected growth. You can see the complete, detailed fundamental study for New Gold Inc here.

Conclusion

For investors using an orderly growth method like the one from "The Little Book That Makes You Rich," New Gold Inc offers an interesting example. The company currently meets many of the important conditions: fast sales and earnings growth, large positive earnings surprises, greatly improving cash flow and margins, and a high return on equity. It shows the kind of speeding operational performance the method aims to identify early.

It is important to weigh this against the noted liquidity worries and to think about the natural instability and cycles of the commodities sector. The filter works as a useful beginning for identification, not a replacement for complete individual research.

Find Other Possible Growth Choices This study of New Gold Inc came from a specific filter based on Louis Navellier's eight rules. Investors wanting to examine other companies that currently meet this multi-factor growth check can locate and adjust the filter here.

Disclaimer: This article is for information only and is not financial advice, a suggestion to buy, sell, or hold any security, or a support of any investment method. The information given is based on data supplied and filters run at a particular time. Investors should do their own study and think about their personal financial situation and risk comfort before making any investment choices.