Rigel Pharmaceuticals Inc (NASDAQ:RIGL) Shows Strong Alignment with Navellier's Growth Criteria

A systematic method for growth investing can help investors find companies with good possibility for future expansion. One established system comes from Louis Navellier's "The Little Book That Makes You Rich," which lists eight specific rules for choosing superior growth stocks. These rules concentrate on positive earnings revisions, consistent earnings surprises, increasing sales and earnings growth, widening profitability, strong cash flow, and high returns on equity. By using these standards through a stock screener, investors can methodically filter the market for companies displaying these desirable financial traits.

Meeting the Little Book Criteria

Rigel Pharmaceuticals Inc (NASDAQ:RIGL) shows notable alignment with Navellier's growth structure, displaying remarkable performance across several key measurements:

• Earnings Revisions and Surprises: The company has had next-quarter EPS estimates revised upward by 307% over the past three months, showing strong analyst confidence. Also, Rigel has reported four consecutive positive earnings surprises with an average beat of 440%, showing consistent ability to surpass expectations.

• Strong Growth Measurements: The company displays extraordinary growth across fundamental measures:

  • Quarterly EPS growth of 5,567% year-over-year
  • Annual EPS growth of 729%
  • Quarterly revenue growth of 176%
  • Annual revenue growth of 106%

• Profitability Widening: Operating margin growth has increased by 664% over the past year, showing the company is scaling profitably as revenue increases. This widening profitability is important for sustainable growth, as it shows the company can maintain efficiency while scaling operations.

• Strong Cash Generation: Free cash flow has grown by 235% over the past year, giving the company financial flexibility to fund future growth projects without heavy reliance on external financing.

• Notable Returns: The company achieves a notable return on equity of 119%, greatly exceeding Navellier's minimum requirement of 10%. This shows highly efficient use of shareholder capital to generate profits.

Fundamental Assessment Overview

According to ChartMill's detailed fundamental analysis, Rigel Pharmaceuticals gets an overall rating of 6 out of 10. The company shows particularly strong valuation characteristics, scoring 10 out of 10 in this group, with a price-to-earnings ratio of 5.49 that places it as notably undervalued relative to both industry peers and wider market averages. The growth rating of 7 out of 10 mirrors the company's impressive historical growth path, though future growth expectations, while still good at 30% annual EPS growth, show some moderation from recent strong levels.

Profitability measurements are solid with a rating of 6 out of 10, featuring exceptional margins including a 39% operating margin and 92% gross margin that rank among the best in the biotechnology industry. The financial health rating of 6 out of 10 shows adequate liquidity with a current ratio of 2.02, though the Altman-Z score indicates some financial risk that needs watching. For a detailed breakdown of these fundamental factors, investors can examine the complete fundamental analysis report.

Investment Considerations

The mix of strong growth, widening profitability, and attractive valuation makes Rigel Pharmaceuticals an interesting candidate for growth investors following the Little Book system. The company's ability to consistently surpass earnings expectations while maintaining good cash generation fits well with Navellier's focus on companies that can surprise to the upside. The high return on equity shows efficient capital allocation, while the notable upward revisions to earnings estimates suggest continuing positive momentum.

However, investors should note that such strong growth rates may be difficult to maintain forever, and the biotechnology sector carries inherent regulatory and development risks. The moderation in expected future growth rates, while still good, suggests the company may be moving to a more mature growth phase. The financial health measurements, while adequate, indicate some areas for improvement as the company continues to scale its operations.

For investors interested in finding more companies that meet the Little Book criteria, the pre-configured screen provides a starting point for further research. This systematic method allows for ongoing monitoring of companies displaying the growth characteristics valued in Navellier's system.

Disclaimer: This article presents factual information and analysis for educational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results, and investing in stocks involves risk including potential loss of principal.