The Little Book That Makes You Rich, written by Louis Navellier in 2007, distills growth investing into eight specific rules designed to identify companies with strong earnings momentum, expanding margins, and accelerating sales. By focusing on fundamental criteria such as positive earnings surprises, rising operating margins, and strong cash flow, the strategy aims to uncover stocks that are not only growing but doing so with improving financial health. We applied this methodology using a stock screener to filter for these exact conditions, and one security that emerged is XOMA ROYALTY CORP - XOMA 8 5/8 PERP (NASDAQ:XOMAP), a biotech royalty aggregator with a portfolio of partnered commercial and clinical-stage therapeutic candidates.
Recent Performance and Growth Metrics
Navellier’s strategy emphasizes strong earnings and revenue growth, and XOMAP delivers on both fronts. The company reported EPS growth of 170.87% over the past trailing twelve months (TTM), while revenue surged 73.96% year-over-year. Quarter-over-quarter sales growth also came in at 57.87%, and EPS grew 157.78% compared to the same quarter last year. These figures highlight the accelerating momentum that the Little Book method prizes—growth that is not just present but compounding.
The strategy also calls for positive earnings momentum, meaning the most recent quarter’s growth should exceed that of the same quarter a year earlier. XOMAP’s current Q2Q EPS growth of 157.78% dwarfs the 8.16% growth recorded four quarters ago, clearly satisfying this rule. As the book explains, this acceleration signals that the company’s earnings strength is increasing, not merely maintaining.
Earnings Surprises and Revisions
Consistently beating analyst estimates is a core tenet of the Little Book approach, as it forces upward revisions and drives share prices higher. XOMAP has beaten EPS estimates in all four of the last four quarters, with an average beat of 623.83%. This is far above the screen’s minimum requirement of at least three positive surprises and an average beat above 10%.
Furthermore, analyst sentiment is shifting in XOMAP’s favor. The EPS estimate for the next quarter has been revised upward by 126.32% over the past three months, well above the 4% threshold used in the screen. In Navellier’s framework, such revisions are a strong indicator because they reflect analysts’ growing confidence in the company’s trajectory, often leading to further price appreciation.
Profitability and Cash Flow
Beyond top-line growth, the strategy looks for improving profitability and strong cash generation. XOMAP’s operating margin has expanded by 152.45% over the past year, far exceeding the 2% growth filter. This suggests the company is scaling efficiently, converting more of its revenue into operating income. Profit margin stands at 35.54%, outperforming 95.93% of industry peers, while operating margin of 21.83% beats 93.80% of competitors.
Free cash flow (FCF) is another critical component, and XOMAP’s FCF grew 108.46% year-over-year, easily clearing the 15% minimum. A strong cash position gives the company flexibility to invest in its pipeline without over-relying on debt. The return on equity (ROE) of 17.83% also meets the 10% threshold, placing it among the top 5% of the biotechnology industry. As the book notes, a high and improving ROE indicates that the company is effectively using shareholder capital to generate profits.
Valuation Metrics
While XOMAP’s growth metrics are impressive, the valuation picture is nuanced. The trailing P/E ratio of 17.90 is below the industry average of 48.89 and the S&P 500’s 27.71, suggesting relative cheapness. However, the forward P/E of 53.38 points to a premium on future earnings. The enterprise value-to-EBITDA ratio is favorable, beating 92.05% of peers, and the price-to-free-cash-flow ratio also ranks well. The Little Book strategy does not demand bargain-bin valuations, but it does reward stocks that can justify their multiples with sustained growth, and XOMAP’s fundamentals appear to support this.
High-Level FA Report Summary
According to our fundamental analysis report, XOMAP earns an overall rating of 6 out of 10. The strongest pillar is growth, scoring 8 out of 10, driven by exceptional EPS and revenue expansion. Profitability scores 6 out of 10, with leading margins and returns. The dividend yield of 8.34% is a standout, though the health score is weaker at 5 out of 10, partly due to a negative Altman-Z score and elevated debt-to-FCF ratio. Valuation scores 5 out of 10, reflecting mixed signals between trailing and forward multiples.
Analyst Views
With analyst estimates being revised sharply higher and the company consistently exceeding expectations, the outlook remains positive. The strong earnings momentum and accelerating revenue growth provide an attractive narrative for growth investors. However, the elevated debt metrics and forward valuation warrant careful monitoring, as Navellier himself advises adjusting criteria based on market conditions.
Conclusion
XOMAP aligns well with the eight rules from The Little Book That Makes You Rich, particularly in areas of earnings momentum, revenue acceleration, and margin expansion. The combination of triple-digit earnings growth, consistent earnings surprises, and strong cash flow makes it a candidate worth further research for those following this methodology.
For investors interested in exploring additional stocks that meet these criteria, you can access the full Little Book screener results here to identify other potential growth opportunities.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.