In the world of growth investing, few strategies have stayed as current as the ideas in Louis Navellier's "The Little Book That Makes You Rich." The center of the method is a structured, eight-rule filter meant to find companies displaying better and speeding financial momentum. The rules look for positive earnings revisions and surprises, rising sales, growing margins, good cash flow, earnings growth, positive earnings momentum, and a high return on equity. The aim is to find businesses not only expanding, but doing so with rising efficiency and profit, traits that frequently come before large stock price gains. A new use of this filter has pointed to OR Royalties Inc (NYSE:OR) as a company that fits these strict standards.
Fitting the "Little Book" Standards
A detailed look at OR Royalties shows how its new financial results match Navellier's eight rules. The company, which buys and manages precious metal royalties and streams, is showing the sort of operational momentum the strategy looks for.
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Positive Earnings Revisions & Surprises: Analysts have been increasing their estimates for OR, with the average EPS estimate for the next quarter moved up by 12.7% over the last three months. This is an important sign that knowledgeable observers see better chances ahead. Also, the company has a history of beating expectations, topping consensus EPS estimates in three of the last four quarters by an average of almost 14%.
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Speeding Growth Measures: The company is displaying strong growth speed, a main idea of the strategy.
- Sales Growth: Quarterly revenue jumped 59.4% compared to the same quarter last year, while yearly revenue growth is at a notable 34.6%.
- Earnings Growth and Momentum: More striking is the earnings performance. EPS increased 69.5% over the past year, and the newest quarter saw EPS double, showing 100% growth year-over-year. Importantly, this current quarterly growth (100%) is much higher than the growth rate from the matching quarter a year ago (0%), pointing to good positive earnings momentum.
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Growing Profit and Good Cash Flow: Growth is most useful when it is profitable. OR's operating margin has grown by over 9 percentage points in the past year, showing the company is turning higher sales into profits at a better rate. This operational effect is supported by outstanding cash generation, with free cash flow rising by 141% over the last twelve months, giving the company important financial room.
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High Return on Equity: The strategy looks for efficient capital users. OR provides a return on equity (ROE) of 14.4%, which is above the lowest 10% level set by the filter and shows good use of shareholder capital.
Fundamental Condition and Price Setting
Outside the specific filter standards, OR Royalties shows a sound fundamental picture, as described in its detailed fundamental analysis report. The company gets high scores for both condition and profit. It has an extremely strong balance sheet with little debt, high liquidity ratios, and an excellent Altman-Z score, pointing to very low bankruptcy risk. Its profit measures are notable, with profit, operating, and gross margins rating with the best in the Metals & Mining industry.
The main area of thought for investors is price setting. The stock sells at a high price, with a P/E ratio above both the industry and the wider S&P 500 average. The growth score is good, mirroring its fast recent past, though analysts expect a slowing in the speed of earnings and sales growth in the next few years. This makes a standard growth-investing situation: paying a higher price now for a company showing exceptional current momentum and financial soundness.
A Beginning for More Study
OR Royalties Inc acts as a clear example of the kind of company the "Little Book" filter tries to find: one with speeding sales and earnings, climbing analyst confidence, growing margins, and very strong financial condition. For investors who agree with Navellier's growth thinking, OR is a strong candidate for more careful review.
This one stock is only a single result from the continuing use of this strategy. Investors wanting to find other companies now passing this multi-factor growth filter can view the complete, new list of results through the Little Book That Makes You Rich screener.
Disclaimer: This article is for information only and is not financial advice, a support, or a suggestion to buy, sell, or hold any security. The "Little Book That Makes You Rich" strategy is a model for explanation and learning. Investors should do their own full study and think about their personal money situation and risk comfort before making any investment choices. Past results of a filter method or a specific security do not show future results.