Growth investing methods often look for companies showing not just present performance, but quickening pace in important financial measures. One organized method for this is described in Louis Navellier’s The Little Book That Makes You Rich, which lists eight particular rules for choosing better growth stocks. These rules center on good earnings revisions and surprises, rising sales and margins, solid cash flow, earnings growth and pace, and a high return on equity. The aim is to create a portfolio of companies that are getting better in their foundations and regularly doing better than predicted, a picture that may result in notable stock price gains.
A recent filter using this system has found Palantir Technologies Inc-A (NASDAQ:PLTR) as a company that fits these strict conditions. The data-focused software company, recognized for its Gotham, Foundry, and Apollo platforms, seems to be performing well on several foundational fronts.
Fitting the "Little Book" Conditions
The filter’s settings turn Navellier’s eight rules into number-based limits. Palantir’s recent financial reports show it passing these limits comfortably, as shown by the given data points:
- Positive Earnings Revisions: Analysts have increased their EPS forecast for Palantir’s next quarter by 20.51% over the past three months. This upward change is a key sign, indicating that experts with detailed knowledge see better short-term possibilities than earlier expected.
- Positive Earnings Surprises: The company has exceeded analyst EPS forecasts in three of the past four quarters, with an average excess of 14.90%. A habit of positive surprises can make the market repeatedly adjust a stock’s price upward.
- Increasing Sales Growth: Palantir is showing fast top-line increase. Revenue rose 47.23% year-over-year on a TTM basis, and sales jumped 62.79% in the latest quarter compared to the same quarter last year. This solid and quickening increase is the base of any growth investment idea.
- Expanding Operating Margin: Profitability is getting much better. Palantir’s operating margin increased by 58.04% over the past year. This widening shows the company is managing its sales growth effectively, turning more revenue into profit, a main mark of good operations.
- Strong Cash Flow: The company’s free cash flow increased by a notable 277.96% over the past year. Solid and rising cash production gives financial room for new ideas, purchases, or handling economic slowdowns, lowering basic risk.
- Earnings Growth: Bottom-line increase is also notable. EPS grew 82.86% year-over-year and 110.00% quarter-over-quarter. This shows that fast-rising sales are successfully becoming profits for shareholders.
- Positive Earnings Pace: The quickening in profitability is clear. The current quarterly EPS growth of 110% is much faster than the 42.86% growth seen in the similar quarter a year ago. This pace hints the business is reaching a turning point.
- High Return on Equity (ROE): Palantir’s ROE is a solid 16.62%. This measure shows the company is producing a good profit from the money shareholders have put in, indicating effective use of equity.
Foundational Soundness and Price Context
A look at Palantir’s wider foundational analysis report gives needed background. The report gives the stock a good total score of 7 out of 10, pointing out very good points in Growth (10/10), Profitability (7/10), and Financial Soundness (8/10).
- Strengths: The company’s growth rates are among the best in the software field. Its profitability measures, including gross, operating, and profit margins, all sit in the top 15-20% of similar companies. Financially, Palantir has no debt and has very good liquidity ratios, giving a very strong balance sheet.
- Points to Note: The main area of debate is price. With a Price/Earnings ratio above 245, the stock is clearly high-priced, even next to growth field peers. The report states that this high price may be partly reasonable due to the company’s excellent profitability and predicted future earnings growth above 50%, but it adds a degree of risk and changeability that investors must recognize.
A Top Pick for Growth Filtering
For investors using methods like Navellier’s, Palantir offers a strong example. It is not only growing, it is quickening across almost every measure the system finds key. The mix of fast sales, quickly widening margins, notable cash production, and steady earnings beats forms a foundational picture that growth filters are made to find early. While the high price needs thoughtful attention and suggests the stock may be subject to sudden moves on any growth letdown, the basic business performance matches well with the "little book" idea of finding companies with better and improving foundations.
Want to find other companies that pass this strict growth filter? You can see the full list and adjust the settings yourself by going to the Little Book That Makes You Rich filter on ChartMill.
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 is based on given data and filter systems described, which have built-in limits. Investors should do their own research and think about their personal money situation before making any investment choices.
