Power Solutions International (NASDAQ:PSIX) Matches Strict Growth Stock Criteria

A systematic method for growth investing can help investors find companies with strong fundamental momentum. One established system comes from Louis Navellier's "The Little Book That Makes You Rich," which lists eight specific rules for choosing leading growth stocks. These rules focus on earnings revisions, surprises, sales and earnings growth, margin expansion, cash flow strength, earnings momentum, and high returns on equity. A recent screen using this system has found Power Solutions International (NASDAQ:PSIX) as matching these strict requirements.

Earnings Revisions and Surprises

The Little Book system gives significant weight to analyst sentiment and company performance. Positive earnings revisions show increasing confidence from analysts, while consistent earnings surprises show a company's capacity to beat expectations.

• The average EPS estimate for the next quarter has been adjusted upward by 53.13% over the last three months.
• The company has exceeded EPS estimates in all of the last four quarters, with an average surprise of 69.52%.

These numbers are important because lasting positive surprises often lead analysts to improve their future estimates, which can increase investor attention and share price gains. The large upward revision for the next quarter indicates analysts have firm belief in PSIX's near-term outlook.

Strong Growth Metrics

Speeding up growth in both sales and earnings forms the center of Navellier's system. The screen demands solid year-over-year and quarter-over-quarter expansion to find companies with real business momentum.

• Revenue increased 40.10% year-over-year and a notable 73.54% quarter-over-quarter.
• EPS jumped 175.57% year-over-year and 211.11% quarter-over-quarter.

This outstanding growth profile shows PSIX is not only increasing its top line at a quickening pace but is also effectively turning that revenue growth into bottom-line profits. The quarter-over-quarter numbers are especially notable, showing major momentum going into the current period.

Profitability and Efficiency

Growing operating margins and solid cash flow generation are signs of a high-standard growth company. These measurements show that sales growth is not happening at the cost of profitability.

• Operating margin grew by 21.35% over the last year.
• Free cash flow increased by 35.81% year-over-year.

The margin growth is particularly significant as it shows the company is increasing sales while also getting better at operational efficiency. The solid free cash flow increase gives financial room to fund future growth projects, lower debt, or follow strategic chances without needing outside financing.

Earnings Momentum and Return Profile

The system looks for companies with quickening earnings momentum and high returns on shareholder equity. These elements can point to a lasting competitive edge and effective capital use.

• The current quarterly EPS growth of 211.11% is much faster than the growth rate from the same quarter a year ago (157.14%).
• Return on Equity is at a very high 81.77%.

The positive earnings momentum confirms the company's growth is speeding up instead of slowing down. The extremely high ROE shows PSIX is creating large profits from the equity put into the business, a main feature of companies with lasting competitive advantages.

Fundamental Assessment Overview

A look at the detailed fundamental analysis report for Power Solutions International shows a company with sound underlying financial health. The report gives PSIX an overall fundamental rating of 6 out of 10, with especially high scores in profitability (8/10) and health (7/10). The company shows excellent return measurements, including Return on Assets of 25.34% and Return on Invested Capital of 28.40%, both placing in the top group of the electrical equipment industry. While valuation looks fair compared to industry peers, the report points out some mixed signs in past performance and liquidity ratios that deserve attention next to the strong growth story.

Finding Similar Opportunities

For investors wanting to find other companies that match the Little Book rules, the pre-configured screen is available for more study and adjustment. This tool lets users change settings based on their specific investment rules and market view.

Power Solutions International presents a strong example of a company that fits the strict growth rules listed in Louis Navellier's system. The company shows strength across several areas, including outstanding sales and earnings growth, growing profitability, positive analyst revisions, and very high returns on equity. While the fundamental analysis points to some areas for watching, the overall picture fits well with the features looked for by growth investors using systematic selection methods.

Disclaimer: This analysis is based on publicly available information and is provided for informational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security, or an offer to participate in any investment strategy. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.