Investors looking for a methodical way to find stocks with high growth frequently use established methods. One framework comes from Louis Navellier's "The Little Book That Makes You Rich," which lists eight basic rules for choosing excellent growth companies. This approach concentrates on measurable data that show a business is growing while also becoming more efficient and profitable. The aim is to locate companies with solid earnings momentum, sound financial condition, and the possibility for continued increase in share price.
A recent filter using Navellier's standards has identified OR Royalties Inc (NYSE:OR), a firm involved in buying and overseeing precious metal royalties and streams. The first look indicates OR displays a number of traits that match the "Little Book" growth concept closely.
Fit with Navellier's Growth Standards
The center of Navellier's approach requires sorting for companies showing positive momentum in earnings, sales, and profit. An examination of OR's latest financial results indicates it satisfies or passes limits in important areas:
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Positive Earnings Revisions & Surprises: A key part of the method is that higher revisions in analyst forecasts often come before price momentum. For OR, the average EPS forecast for the next quarter has increased by 21.34% in the past three months. Also, the company has exceeded earnings forecasts in three of the past four quarters, with an average surprise of 13.95%. Repeated positive surprises can make analysts reconsider their future estimates, a process Navellier notes as a significant catalyst.
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Increasing Growth in Sales and Earnings: The method looks for companies where growth is not only happening but getting faster. OR shows solid momentum here:
- Sales growth from one quarter to the next is 59.43%, while year-over-year revenue growth is 34.64%.
- More notably, earnings growth is rising quickly. EPS grew 100% compared to the same quarter last year, a large rise from the 0% growth seen in the similar quarter the year before. This positive earnings momentum is a vital filter in the screen, meant to find companies at a turning point in profit.
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Growing Profitability and Solid Cash Generation: Growth is most useful when it leads to wider profit margins and cash flow. Navellier's rules stress widening operating margins and solid cash flow as indicators of efficient, scalable business.
- OR's operating margin has increased by 9.15 percentage points in the last year.
- Possibly more notable, the company's free cash flow rose by 141.36% year-over-year. Solid and increasing cash flow gives a company financial options to fund activities, seek chances, or give capital to shareholders without needing outside money.
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High Return on Equity: The last rule requires a high return on equity (ROE), showing management's skill at creating profit from shareholder money. OR's ROE of 14.39% is above the method's lowest limit of 10%, indicating effective use of equity.
Basic Financial Condition and Valuation Setting
Apart from the specific screen standards, a wider basic analysis of OR Royalties gives more setting. According to its detailed basic report, the company grades well in total, especially in the parts of profit and financial condition.
The report notes outstanding profit margins, with an operating margin above 72% and a profit margin close to 74%, putting it at the head of its field. Financially, the company seems sound with a good balance sheet, almost no debt, and high liquidity ratios, pointing to few solvency or short-term cash worries.
On growth, past results have been solid, with EPS growing almost 70% over the past year. However, the valuation shows a varied picture. The stock sells at a high level based on its current price-to-earnings ratio, though its forward P/E is closer to industry averages. The valuation grade in the basic report is balanced by the company's high profit and expected future earnings growth, which could support a higher multiple for some investors.
A Beginning for More Study
The use of Louis Navellier's methodical screen has found OR Royalties as a company showing the basic momentum and financial traits the method looks for. Its strong earnings revisions, quickening growth, widening margins, and notable cash flow creation fit the "Little Book" structure for seeing possible growth choices.
For investors wanting to examine other companies that pass this strict set of growth filters, the screen is open to the public. You can see the present list of qualifying stocks and change the standards using your own study by visiting the Little Book That Makes You Rich screen here.
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 study uses data thought to be dependable, but its correctness is not assured. Investors should do their own separate study and talk with a qualified financial advisor before making any investment choices.