In terms of revenues,
is the classic growth stock.
#-ad_banner-#Its sales have grown at least 20% for 20 straight
years, and analysts think the winning streak will continue, with
consensus projected sales growth of 20.7% this year (to an
eye-popping $89 billion). Yet in 2015, this remarkable streak may
come to an end, as sales growth slips to just 19%. (Elusive
profit growth for Amazon is a topic for another day, though
my colleague Serge Berger did take a look at
Amazon this morning
Amazon's streak of 20% sales growth got me thinking. How hard
is it to maintain a robust growth pace? Very hard, as it turns
out. Of the 1,500 companies in the S&P 400, 500 and 600, only
16 of them are expected to boost sales at least 20% in 2014, 2015
Of these 16, special mention goes to
. These companies are on pace for than $10 billion in sales by
next year and are fighting the "Laws of Bigness." (However, a
massive wave of
insider selling at Priceline last month
led me to wonder if that company's robust growth streak can
really be maintained.)
The group of 16 growth stocks represents various parts of the
U.S. economy, highlighting the fact that strong market share
strategies can pay off in almost any industry.
Cabot Oil & Gas (NYSE:
as an example.
As I noted earlier this month
, Cabot's current drilling plans are expected to lead to a big
spike in output over the next few years. The company's executives
decided to plow ahead with development plans, even as rivals were
retrenching. The fact that
have risen more than 10% in the past three weeks simply
underscores the wisdom of that strategy, and could lead to rising
sales and profit estimates.
Strong growth also brings intangible rewards. Athletic apparel
Under Armour (NYSE:
, which is one of the elite 16 growers (and which
my colleague Melvin Pasternak profiled last
), has just been invited to join the S&P 500. The company
just exceeded first-quarter sales and profits forecasts, and
"based on current momentum and updated outlook, UA remains well
positioned to further raise guidance over the balance of the
year," predict analysts at D.A. Davidson. A 20% pullback in this
stock over the past month is the kind of entry point that
long-term growth-oriented investors look for.
Of course, in many cyclical industries, it's impossible to
maintain very strong growth rates when the economy slumps. And
that was a lesson learned by
Eagle Materials (NYSE:
, a maker of drywall, cement and other materials used in
homebuilding. Eagle experienced solid growth a decade ago, but
when the housing market tanked, so did Eagle's revenue base.
Sales fell by half from fiscal 2007 through fiscal 2011 (to
around $460 million).
Yet even before the pace of home construction returns to
normal levels, Eagle is again experiencing solid growth: Sales
are now growing at a 30% pace and are expected to surpass $1.1
billion in the current fiscal year, which began this month.
That's 25% higher than the peak in fiscal 2007, and it's setting
the stage for solid profit growth: Earnings per share (
) are growing at a 50% pace these days, a pace which could be
sustained for an extended period if the housing market finally
starts to grow at a solid clip.
A Biotech Tweener
Growth-oriented investors should also check out
Alexion Pharmaceuticals (Nasdaq:
, which falls through the cracks between the massive
well-established biotechs, and the small-cap biotechs that are
Alexion targets rare and severe diseases, and has built a
broad platform of drugs to treat them. Sales growth has never
been less than 37% at any point in the past eight years, and 20%
to 25% growth appears locked in over coming years as well.
Analysts at UBS, who see 30% upside to their $202 price target,
believe that a healthy drug pipeline provides multiple catalysts
this year in the form of clinical trial updates. They suggest
that shares would be worth $230 in a buyout scenario.
Risks to Consider:
These companies have been delivering solid growth in a slowly
improving economy, and would be hard-pressed to maintain growth
if the economy slumps. Moreover, such impressive growers are
rarely cheap, so these stocks could prove to be more vulnerable
than most if the market sharply pulls back.
Action to Take -->
These companies share the common trait of market share gains, and
rising market share tends to correlate with rising profit
margins. Indeed, many of the companies in this group have an
impressive track record of profit margin expansion, and are
expected to boost profits even faster than sales in coming years.
They are not necessarily good trades, as none of them are
dirt-cheap, but should instead be seen as solid buy-and-hold