TransMedics Group Inc (NASDAQ:TMDX) Passes Rigorous Growth Stock Screen

A systematic method for growth investing can help investors find companies with good momentum and fundamental progress. One established method comes from Louis Navellier's "The Little Book That Makes You Rich," which lists eight specific rules for choosing leading growth stocks. These rules concentrate on positive earnings revisions and surprises, increasing sales and earnings growth, growing profitability, good cash flow, and high returns on equity. A stock screener created on these ideas can find companies showing these traits, and one such company that currently passes this screen is TransMedics Group Inc (NASDAQ:TMDX).

Meeting the Little Book Criteria

TransMedics Group shows a strong match with the central parts of Navellier's growth plan. The company's recent financial results show notable strength across several important filters used in the screen.

• Positive Earnings Revisions: Analysts have increased their EPS estimate for the next quarter by 12.82% over the last three months. This upward change is a good sign, indicating that analysts have more confidence in the company's short-term profit potential, a key part of the first rule in the plan.
• Positive Earnings Surprises: The company has surpassed EPS estimates in three of the last four quarters, with an average surprise of 55.99%. Regularly beating expectations, as stated in the second rule, often leads analysts to reassess their future estimates, which can be a reason for stock price increases.
• Sales and Earnings Growth: TransMedics is showing very fast growth in its main business activities.
  • Revenue grew 82.74% year-over-year.
  • Quarterly sales growth was 32.23%.
  • Year-over-year EPS increased 162.77%.
  • Quarterly EPS growth was a notable 450%. This solid growth in both revenue and profit directly meets the third and sixth rules of the plan, which look for companies that are not only growing, but growing at a faster rate.
• Growing Operating Margins: The company's operating margin growth over the past year is a very large 4,238.02%. This fast growth, matching the fourth rule, shows the company is effectively turning its rising sales into even higher profitability, a sign of good operational management.
• Good Cash Flow & High ROE: The company's free cash flow grew by 142.54% over the past year, meeting the fifth rule and showing financial stability and self-supported growth. Also, its Return on Equity (ROE) of 22.53% is much higher than the 10% minimum needed by the eighth rule, showing it is very good at creating profits from shareholder equity.

Fundamental Analysis Overview

A detailed fundamental analysis for TransMedics gives it a neutral rating of 6 out of 10. The analysis points out that while the company's profitability and financial health get varied scores, its growth profile is very strong. The report confirms the very fast growth in both earnings and revenue, noting that this solid growth happens while the stock's price is seen as neutral compared to its industry. This mix of strong growth and a fair industry-relative price makes TMDX a significant candidate for growth-focused investment plans.

Investment Considerations

While the company does very well on the growth and momentum measures central to the Little Book plan, investors should look at the complete situation. The fundamental report notes a high debt-to-equity ratio, showing a dependence on debt financing. Also, while the Price-to-Earnings ratio seems high in absolute terms, it is priced more favorably when compared to its industry peers and when looking at its high expected earnings growth, as shown in its PEG ratio. For a growth investor, the main question is whether the company's very high growth rates can support its current price and handle its debt level over the long term.

The Little Book screen is an active tool for finding possible growth stories. To see the current list of companies that meet these strict requirements, you can view and customize the screen here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The information presented should not be used as the sole basis for any investment decision. Always conduct your own due diligence and consult with a qualified financial advisor before making any investment.