Perimeter Solutions Inc (NYSE:PRM) Fits Louis Navellier's Growth Investing Strategy with Strong Earnings Momentum and Rising Revenue

Louis Navellier's "The Little Book That Makes You Rich" presents a growth investing method centered on finding stocks with solid earnings momentum, rising revenue, and better profitability. The strategy highlights eight main rules, such as upward earnings revisions, growing margins, and strong return on equity, to spot companies likely to deliver long-term gains. By filtering for these traits, investors seek to identify stocks with strong fundamentals before wider market attention pushes prices higher.

Perimeter Solutions Inc (NYSE:PRM) appears as a potential match for Navellier's approach, displaying multiple qualities that fit the Little Book strategy. Here’s a breakdown of how PRM aligns with the screening criteria:

1. Upward Earnings Revisions & Surprises

• EPS Revisions: Analysts have increased next-quarter EPS estimates by 12.77% in the last three months, showing rising confidence in short-term earnings.
• Earnings Surprises: PRM has surpassed EPS estimates in three of the past four quarters, with an average surprise of 260%, well above the 10% target in the screen.
  Why it matters: Steady upward revisions and surprises often lead to further estimate increases and price gains, a key part of Navellier’s method.

2. Rising Revenue Growth

• Quarterly Sales Growth (Q2Q): 27.8%
• Annual Revenue Growth (TTM): 74.2%
  Why it matters: Fast top-line growth is vital for growth stocks, and acceleration points to strong demand. PRM’s numbers exceed the screen’s 20% minimum for both measures.

3. Growing Operating Margins

• Operating Margin Growth (1Y): 84.5%
• Current Operating Margin: 25.9% (better than 93% of chemical industry peers)
  Why it matters: Margin growth indicates pricing strength or cost control, boosting earnings growth.

4. Solid Cash Flow & Earnings Momentum

• Free Cash Flow Growth (1Y): 1,889% (due to operational gains).
• EPS Growth (Q2Q): 178.6%, far ahead of the year-ago quarter’s drop of -54.8%.
  Why it matters: Cash flow supports reinvestment, while earnings momentum marks turning points in operations.

5. Strong Return on Equity (ROE)

• ROE: 11.0%, above the 10% target and higher than 78% of industry peers.
  Why it matters: ROE tracks capital efficiency; Navellier prefers firms that deliver strong returns on shareholder equity.

Fundamental Rating Summary

ChartMill’s fundamental analysis report gives PRM a neutral score of 5/10, reflecting mixed financial health but strong profitability metrics. Key points:

• Profitability: High gross (56.5%) and operating margins (25.9%) rank among the best in the chemicals sector.
• Valuation: Forward P/E of 15.6x is fair compared to projected 50.4% yearly EPS growth (PEG ratio hints at undervaluation).
• Risks: Past net income losses and high debt (though improving) need attention.

Conclusion

PRM fits Navellier’s growth model with its strong revenue path, margin growth, and earnings momentum. While its financial health is middling, the company’s operational gains and cash flow make it worth considering for growth-focused investors.

For more stocks matching the Little Book criteria, check the full screen here.

Disclaimer: This analysis is not investment advice. Perform detailed research or consult a financial advisor before making investment choices.