Growth investors look for companies that show not only present stability, but also quickening progress in important financial areas. One method for finding these companies is described in Louis Navellier’s The Little Book That Makes You Rich, which lists eight basic rules for choosing leading growth stocks. These rules center on upward earnings adjustments and surprises, quickening sales and earnings increases, widening profit margins, good cash flow, and a high return on equity. The aim is to locate businesses where operational foundations are getting better more quickly than the market anticipates, which could result in notable stock price gains. A recent filter using these ideas has pointed to On Holding AG-Class A (NYSE:ONON) as a notable option for more examination.
Fit with the "Little Book" Growth Rules
On Holding, the Swiss performance sportswear company known for the On Running brand, seems to fit many of Navellier's strict growth criteria. The given data indicates good agreement with the main ideas of the method:
- Upward Earnings Adjustments: Analysts have increased their EPS forecast for the next quarter by 7.66% in the past three months. This rise is a key sign in Navellier's system, implying that knowledgeable viewers see building speed that may not be completely accounted for in the stock price yet.
- Positive Earnings Surprises: The company has exceeded analyst predictions in three of its past four quarterly announcements, with an average surprise of 11.88%. Repeated positive surprises can make the market reconsider its long-term growth estimates for the company.
- Quickening Sales and Earnings Increases: On Holding displays solid top-line and bottom-line growth.
- Revenue increased 33.26% year-over-year and 24.94% quarter-over-quarter.
- More significantly, earnings growth shows clear quickening. EPS jumped 193.75% compared to the same quarter last year, a sharp rise from the -27.27% growth reported in the similar quarter a year before. This positive earnings speed is a central part of the method, pointing to a strong turning point in profit generation.
- Widening Profit Margins: The company's operating margin increased by a notable 31.01% over the last year. This shows a capacity to turn higher sales into profits at a growing rate, a mark of operational effectiveness and pricing strength that growth investors value.
- Good Cash Flow Production: On Holding's free cash flow increased by a striking 1,669.22% over the past year. Navellier stresses good cash flow as it gives a company the financial ability to fund its own growth, put money into new ideas, and handle economic slowdowns without too much need for outside funding.
- High Return on Equity (ROE): The company's ROE is 14.55%, well above the 10% limit set in the filter rules. A high ROE shows that management is using shareholder money well to create profits.
Basic Health and Price Context
An examination of On Holding's wider basic profile, as shown in its detailed analysis report, gives more background. The company receives a good total basic rating of 6 out of 10, with specific strong points in Profitability and Financial Health. Its profit margins score well within the competitive apparel industry, and its balance sheet is solid, with good liquidity and solvency measures showing very low bankruptcy risk.
The main warning for investors is in its Price. The stock sells at a high level, with a P/E ratio above the industry and wider market averages. This is a common trait of fast-growth companies, as the market accounts for future expansion. The price score of 2 out of 10 shows this high cost. However, the report states that this high level may be partly reasonable given the company's outstanding growth path and high profit generation.
A First Step for More Study
The filter based on Louis Navellier's method works as a strong first step, pointing out companies like On Holding that are showing quickening across several financial areas at the same time, which often comes before good stock results. It is key to recall that such filters are an initial phase in a review process, not a final instruction to buy.
For investors wanting to look at other companies currently passing this active growth filter, you can see all the newest outcomes here.
Disclaimer: This article is for information only and is not financial guidance, a suggestion, or an offer to buy or sell any security. The "Little Book" filter is a model using past and present data; previous results do not guarantee future outcomes. Investors should do their own complete study and think about their personal money situation and risk comfort before making any investment choices.
