Profit Ideas: 10 High-Growth Stocks with Strong Sources of Profitability

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(List compiled by Rebecca Lipman. ROE data sourced from Google Finance. All other data sourced from Finviz.)

Looking for profitable companies that show promise down the road? For this list we explored a universe of stocks that are currently experiencing strong upward momentum and have analyst expectations for further growth in the years ahead.

To start, we collected a list of names rallying above their 20, 50, and 200-day moving average. This signals that the company is rapidly increasing in value and surrounded by positive market sentiment.

We sorted through those names for those that show promise of continuing on their upward trend. To do that we looked at 5-year earnings per share data. We screened only the names that analysts expect to grow more than 20% in the next five years.

The DuPont Equation

Both of these data points indicate high growth, but these data points should not be used alone. It’s important for investors to understand the sources for that growth – is it sustainable?

With that in mind we collected data on profitability sources. One of analysts’ favorite profitability tools is DuPont analysis – it’s a way to look at changes in return on equity (ROE) profitability [i.e. net income/equity] by attributing those changes to certain sources. Some of the sources are more sustainable than others, thereby giving an analysis of strength in increasing profitability.

DuPont analysis breaks up a company’s ROE into three components: net margin, asset turnover, and leverage. Companies with increasing ROE along with increasing net margin, increasing asset turnover, and decreasing leverage are viewed favorably.

Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.

The List

Do you think these high-growth companies have strong enough profitability to rally higher and meet analyst expectations?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

List sorted by change in ROE.

1. AeroVironment, Inc. (AVAV): Designs, develops, produces, and supports unmanned aircraft systems (UAS), and efficient energy systems for various industries and governmental agencies. Market cap of $708.08M. EPS growth next 5 years at 20.83%. The stock is currently trading 0.54% above its 20-day MA, 0.48% above its 50-day MA, and 3.29% above its 200-day MA. MRQ Net Profit Margin increased to 8.20% from 0.41% year-over-year, Sales/Assets increased to 0.25 from 0.23, while Assets/Equity decreased to 1.18 from 1.19.

2. Neurocrine Biosciences Inc. (NBIX): Engages in the discovery, development, and commercialization of drugs for the treatment of neurological and endocrine-related diseases and disorders in the United States. Market cap of $411.69M. EPS growth next 5 years at 69%. The stock is currently trading 11.35% above its 20-day MA, 13.85% above its 50-day MA, and 6.25% above its 200-day MA. MRQ Net Profit Margin increased to 75.38% from 23.04% year-over-year, Sales/Assets increased to 0.28 from 0.10, while Assets/Equity decreased to 2.58 from 9.0.

3. Allot Communications Ltd. (ALLT): Engages in developing, selling, and marketing Internet protocol service optimization solutions in Europe, the Middle East, Africa, the Americas, Asia, and Oceania. Market cap of $541.03M. EPS growth next 5 years at 38%. The stock is currently trading 11.86% above its 20-day MA, 28.92% above its 50-day MA, and 27.1% above its 200-day MA. MRQ Net Profit Margin increased to 10.35% from 5.11% year-over-year, Sales/Assets increased to 0.20 from 0.17, while Assets/Equity decreased to 1.39 from 1.41.

4. Golar LNG Ltd. (GLNG): Engages primarily in the transportation, regasification, and liquefaction of LNG. Market cap of $3.54B. EPS growth next 5 years at 80%. The stock is currently trading 1.67% above its 20-day MA, 10.49% above its 50-day MA, and 32.81% above its 200-day MA. MRQ Net Profit Margin increased to 17.67% from 5.86% year-over-year, Sales/Assets increased to 0.03 from 0.03, while Assets/Equity decreased to 3.86 from 5.37.

5. Omnicell Inc. (OMCL): Offers automated solutions for hospital medication dispensing and supply management primarily in the United States and Canada. Market cap of $552.12M. EPS growth next 5 years at 26.5%. The stock is currently trading 5.11% above its 20-day MA, 7.5% above its 50-day MA, and 8.93% above its 200-day MA. MRQ Net Profit Margin increased to 4.64% from 2.27% year-over-year, Sales/Assets increased to 0.18 from 0.17, while Assets/Equity decreased to 1.29 from 1.30.

6. Constant Contact, Inc. (CTCT): Provides on-demand email marketing, social media marketing, event marketing, and online survey solutions primarily in the United States. Market cap of $746.47M. EPS growth next 5 years at 40.6%. The stock is currently trading 9.91% above its 20-day MA, 19.55% above its 50-day MA, and 5.06% above its 200-day MA. MRQ Net Profit Margin increased to 9.84% from 6.56% year-over-year, Sales/Assets increased to 0.29 from 0.28, while Assets/Equity decreased to 1.32 from 1.36.

7. Rackspace Hosting, Inc. (RAX): Operates in the hosting and cloud computing industry. Market cap of $5.77B. EPS growth next 5 years at 30.35%. The stock is currently trading 2.77% above its 20-day MA, 7.72% above its 50-day MA, and 8.62% above its 200-day MA. MRQ Net Profit Margin increased to 7.55% from 5.91% year-over-year, Sales/Assets increased to 0.27 from 0.26, while Assets/Equity decreased to 1.76 from 1.84.

8. DXP Enterprises, Inc. (DXPE): Distributes maintenance, repair, and operating products (mro), equipment, and services to industrial customers in the U. Market cap of $441.19M. EPS growth next 5 years at 25.8%. The stock is currently trading 4.66% above its 20-day MA, 20.77% above its 50-day MA, and 25.37% above its 200-day MA. MRQ Net Profit Margin increased to 3.98% from 3.10% year-over-year, Sales/Assets increased to 0.61 from 0.56, while Assets/Equity decreased to 2.33 from 2.69.

9. OSI Systems, Inc. (OSIS): Designs, manufactures, and sells specialized electronic systems and components for applications in homeland security, healthcare, defense, and aerospace markets worldwide. Market cap of $930.62M. EPS growth next 5 years at 24.83%. The stock is currently trading 3.24% above its 20-day MA, 9.4% above its 50-day MA, and 19.27% above its 200-day MA. MRQ Net Profit Margin increased to 2.95% from 2.64% year-over-year, Sales/Assets increased to 0.27 from 0.25, while Assets/Equity decreased to 1.54 from 1.56.

10. Shuffle Master Inc. (SHFL): Develops, manufactures, and markets technology and entertainment-based products for the gaming industry worldwide. Market cap of $640.71M. EPS growth next 5 years at 25%. The stock is currently trading 6.77% above its 20-day MA, 13.01% above its 50-day MA, and 19.68% above its 200-day MA. MRQ Net Profit Margin increased to 15.65% from 11.33% year-over-year, Sales/Assets increased to 0.18 from 0.17, while Assets/Equity decreased to 1.46 from 1.83. 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets


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