Investors looking for a methodical way to find stocks with high growth frequently use proven systems. One framework is presented in Louis Navellier's "The Little Book That Makes You Rich," which lists eight basic rules for choosing excellent growth companies. This method concentrates on measurable data that show a company is expanding while also becoming more efficient and profitable. The aim is to locate firms with solid forward movement in earnings, sales, and business performance, which may result in notable increases in stock price.
A recent filter using Navellier's standards has identified Ubiquiti Inc. (NYSE:UI) as a firm that fits these strict growth requirements. Ubiquiti creates and markets networking gear and software, aiming at service providers, businesses, and individual users with a set of wireless, switching, and security items.
How Ubiquiti Fits the "Little Book" Standards
The eight rules from Navellier's book act as a list for major growth possibility. Ubiquiti's recent financial results display good correspondence with these ideas:
- Positive Earnings Revisions: Experts have increased their earnings per share (EPS) forecast for Ubiquiti's upcoming quarter by more than 9% in the past three months. This rising adjustment is an important sign, as it implies experts have increasing belief in the firm's short-term outlook based on new data.
- Positive Earnings Surprises: Ubiquiti has a flawless history of outperforming expert predictions, surpassing EPS estimates in every one of the past four quarterly announcements. The average surprise was a large 30.1%. Steady positive surprises frequently make the market reconsider a company's future earnings capacity.
- Increasing Sales Growth: The firm shows solid expansion in revenue. Year-over-year sales growth is at 33.4%, while the latest quarter experienced a sales increase of 35.8% versus the same time last year. Speeding up sales are essential for any growth narrative.
- Expanding Operating Margin: Ubiquiti's operating margin increased by a notable 25.9% over the previous year. This shows the firm is effectively turning its greater sales into earnings at a rising pace, a mark of operational effectiveness and price strength.
- Strong Cash Flow: The company's free cash flow increase is outstanding, rising by over 537% in the past year. Solid and increasing cash flow offers financial freedom to support activities, put money into expansion, or give capital back to investors without needing outside funds.
- Earnings Growth: Profit growth is similarly strong. Ubiquiti's EPS increased 86.6% over the past year, and the most recent quarter had a 70.2% rise compared to the year before. This proves the sales growth is successfully reaching net income.
- Positive Earnings Momentum: The present quarterly EPS growth rate of 70.2% is greater than the 65.2% growth rate from the similar quarter a year earlier. This quickening in the pace of earnings growth is a strong forward movement sign looked for by growth investors.
- High Return on Equity (ROE): Ubiquiti produces an excellent return on equity of 95.6%. This figure shows how efficiently the company is using money invested by shareholders to create profits, a characteristic of a capably run growth business.
Basic Financial Condition and Price Context
Apart from the specific filter standards, a wider view of Ubiquiti's basic finances shows a firm with excellent condition and earnings, though with a high price. Based on a full fundamental analysis report, Ubiquiti receives a high total score, pushed by leading marks in earnings and financial condition.
The company's earnings figures are excellent, with return on assets, equity, and invested capital all placed at the highest level of the communications equipment sector. Financially, Ubiquiti has no debt and has a solid Altman-Z score, showing very little risk of failure. However, its liquidity ratios, like the quick ratio, are seen as points of lesser strength, though this is typical in efficiently run, fast-growth companies.
The main warning relates to price. Ubiquiti sells at a price-to-earnings ratio over 50, which is high both compared to the wider S&P 500 and its own projected future growth rate. This high number indicates the market has already accounted for major future achievement, allowing little space for mistakes. Growth is also predicted to slow from its recent fast speed, with expert forecasts indicating single-digit percentage growth in both sales and earnings in the next few years.
A Prospect for Growth-Centered Plans
For investors using a method like Navellier's, Ubiquiti offers a strong example. It meets the requirements for present, quickening growth in sales, earnings, and operational effectiveness. The company's perfect performance in exceeding forecasts and its extraordinary returns on capital highlight an effective business model. This description makes it a possible prospect for growth-focused trading or as a main part of a portfolio for investors who think its growth path can persist.
It is important to note that filters are beginnings for more study, not instructions to purchase. The high price and expected growth slowdown are major elements that need thoughtful evaluation against the company's growth forward movement.
Interested in examining other firms that pass this growth filter? You can locate and adjust the "Little Book" filter yourself here.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any securities. The analysis is based on data provided and screening methodologies described. Investors should conduct their own thorough research and consider their individual financial circumstances and risk tolerance before making any investment decisions.
