While thousands of companies achieved earnings growth during the economic expansion that ended a year ago, prospects for most are dimmer for the current and upcoming recessionary years.
But an analysis of TheStreet.com Ratings' stock database found five companies whose growth is expected to continue.
Parameters were established to identify companies likely to achieve continuing earnings growth rather than just short-term spurts in profitability. To qualify, firms needed to increase earnings over the past three years and, in the opinion of a consensus of analysts, extend the trend for the current and following year.
Each of the stocks on the accompanying table survived these filters:
- Compound annual earnings per share growth of at least 15% for the past three years.
- Consensus forecast for EPS growth of at least 15% in the current year as well as for the following year.
- Market cap of at least $250 million.
- A grade in the "A" range by TheStreet.com Ratings, equivalent to a "buy" recommendation.
The quintet in the table that survived the above constraints represent interesting diversity. With representation in chemicals, biotech, education, electronics and health care, they cut across a spectrum of business lines. They vary from $460 million to $4.2 billion in market capitalization. Annual revenue ranges from $176 million to $1.1 billion.
Their businesses range from the forefront of high technology to labor-intensive endeavors.
As is appropriate for stocks expected to grow, each is priced at more than 20 times next year's consensus earnings estimate. But as measured by their respective PEG ratios -- a stock's P/E ratio divided by its growth rate -- four of the stocks are expected to experience EPS growth next year at rates exceeding their P/E ratios based on next year's EPS totals. Only
is expected to produce growth roughly equal to its projected P/E ratio, which is still an impressive set of numbers.
Balchem serves a unique niche in the chemical industry. The firm develops, manufactures and markets specialty performance ingredients and products for the food, nutritional, feed, pharmaceutical and medical-sterilization industries.
is engaged in the research and development of pharmaceutical products for acute medical care. Its focus has been on state-of-the art anti-infective measures.
For those who anticipate that some significant portion of the rapidly swelling hordes of unemployed, underemployed and those involuntarily employed part time will seek education to better their individual lots,
might seem like an interesting investment.
The firm owns and operates DeVry University, Advanced Academics, Ross University, Chamberlain College of Nursing and Becker Professional Review. Its schools offer associate's, bachelor's and master's degree programs in technology, health-care technology, business and management. Ross University is a provider of medical and veterinary medical education. Becker Professional Review prepares candidates for the certified public accountant and chartered financial analyst examinations as well as professional education programs and seminars in accounting and finance.
The spiraling cost of education is likely to prompt lawmakers to boost programs to ease the financial burden on students, which should benefit for-profit educational firms such as DeVry.
designs, manufactures and markets state-of-the-art thermal-imaging systems, primarily for the industrial and government markets, with international as well as domestic clients.
Aging Baby Boomers ought to be a positive factor in the long-term growth of
. The firm provides home-based care services, primarily through home-nursing agencies and hospices, most of which is based on Medicare. It also operates long-term acute-care hospitals and outpatient rehabilitation clinics. The firm operates in Louisiana, Mississippi, Arkansas, Alabama, Texas, Kentucky, Florida, Tennessee, Georgia, West Virginia, Ohio and Missouri.
Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.