Ubiquiti Inc (NYSE:UI) Passes Louis Navellier's "Little Book" Growth Stock Screen

In growth investing, few methods are as clear and practical as the one presented in Louis Navellier's "The Little Book That Makes You Rich." The plan breaks down the search for strong growth stocks into eight specific rules, concentrating on earnings momentum, rising sales, increasing profitability, and sound financial condition. It is a structured way meant to find companies that are not only expanding, but doing so with greater efficiency and favorable momentum that can lead stock prices upward. A recent filter using these rules has identified Ubiquiti Inc (NYSE:UI) as a notable option for investors using this approach.

Matching the "Little Book" Rules

Ubiquiti’s recent financial reports show a solid fit with Navellier's main ideas. The company’s performance displays the type of rising, high-caliber growth the method aims to find.

• Positive Earnings Revisions & Surprises: Analysts have increased their earnings estimates for the next quarter by more than 9% in the past three months, an important sign of better forward outlook. Also, Ubiquiti has not only met but greatly surpassed forecasts, reporting an average earnings surprise of 30% over its previous four quarterly results, with positive surprises in each period.
• Strong and Rising Growth: The company is showing forceful growth in both revenue and profit. Revenue increased 36.8% year-over-year, while sales in the latest quarter jumped 33.3% compared to the year-ago period. More significantly, earnings growth is rising. The 61.7% year-over-year EPS growth in the last quarter clearly exceeds the 45.6% growth from the similar quarter a year earlier, meeting the "positive earnings momentum" rule.
• Increasing Profitability and Sound Cash Flow: As sales rise, Ubiquiti is effectively turning them into higher profit. Its operating margin grew by a notable 25.9% over the past year. The company is also producing substantial cash, with free cash flow rising by over 537% in the past twelve months, offering strong means to support future expansion or return capital to shareholders.
• Outstanding Returns: The method stresses high return on equity (ROE) as a sign of efficient capital use. Ubiquiti performs well here, with an ROE of 95.6%, which shows a remarkable capacity to generate profits from shareholder equity.

Fundamental Condition and Valuation Setting

An examination of Ubiquiti’s wider fundamental situation, as described in its detailed analysis report, backs the growth story found by the filter. The company receives high scores for profitability and financial soundness, with leading industry positions for return on assets, invested capital, and equity. Its balance sheet is particularly solid, having no debt, which adds to a high solvency score.

However, this quality and growth have a cost. The valuation score is low, with a Price-to-Earnings ratio of 45.2, which is high compared to the wider S&P 500. This is a typical feature of high-growth stocks found by momentum-based filters. The fundamental report also points out that while past growth has been very strong, analyst projections for future revenue and earnings growth are more restrained, indicating a possible shift to a more standard growth rate.

A Leading Option for Growth-Oriented Methods

For investors using the "Little Book" method, Ubiquiti Inc offers a clear example of what the approach intends to locate: a company in a forceful growth stage, supported by positive earnings surprises and upward revisions, with rising fundamentals and excellent returns on capital. The filter successfully points out the strong short-to-medium term operational momentum the company is seeing.

It is important to note that such filters are a beginning for more investigation, not a direct instruction to buy. The current high valuation and more cautious long-term growth outlook emphasize the need for context and personal risk evaluation. In a market where both long-term and short-term directions for the S&P 500 stay favorable, growth stocks like Ubiquiti often stay highlighted, but they also involve greater price swings.

Interested in reviewing other companies that pass this strict growth filter? You can find the complete, current list of qualifying stocks via the Little Book That Makes You Rich screener on ChartMill.

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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 analysis is based on data provided and screening methodologies, which have inherent limitations. Investors should conduct their own due diligence and consider their individual financial circumstances and risk tolerance before making any investment decisions.