The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( MagicDiligence) -- Joel Greenblatt's Magic Formula® Investing (MFI) strategy is a value-stock-picking mechanism. It looks for stocks with the best combination of a high earnings yield and a high return on tangible capital, creating a simple algorithm to find "great companies at cheap prices." What is does not consider is growth, a key ingredient to determining if a stock is truly "cheap," or justifiably carries a low multiple of earnings. Wouldn't it be nice to find great, growing companies at cheap prices? The combination of earnings and multiple growth is what can lead to huge stock price advances. One of the greatest but least talked about "super investors" was Shelby Davis, who generated 23% compound annual returns over a 47-year investing career (turning $50,000 into $900 million!). He looked for exactly the situation we are talking about here, dubbed the "Davis Double Play." Follow TheStreet on Twitter and become a fan on Facebook. There are several measures of growth, but probably the purest is revenue growth. You cannot grow a business over the long run without it, and Wall Street funds are attracted to it like moths to the flame. Therefore, in this article, I will show you the 10 MFI stocks with the greatest revenue growth, measured by the most recent quarter's year-over-year comparison. To do this, I used the three MFI screens always followed by MagicDiligence: the top 50 stocks over $50 million market cap, the top 50 over $1 billion and the top 30 over $3 billion.
Persistent high oil prices going forward are key to Vaalco maintaining sales growth, as this company has not been particularly aggressive or successful at increasing production volumes. 9. SanDisk ( SNDK): +18.8% SanDisk is the largest pure play on flash memory, a medium for computer storage used in all mobile consumer electronics and increasingly in PC notebooks and servers. There is little doubt that flash memory volume growth will be robust going forward. The key for SanDisk is maintaining supply/demand balance in order to maintain gross margins near 40%. If the company can do that (it has for two years now), the stock looks meaningfully undervalued at present. 8. j2 Global ( JCOM): +19.8% After several years of sub-5% sales growth, 2011 was a breakout year for this provider of eFax, voicemail and backup storage products. Revenue has increased at 20% or higher rates for three quarters in a row now, mostly organic. With a debt-free balance sheet and a newly-minted dividend yield approaching 3%, we've got a live one here! The main question to me is: Can double-digit growth be maintained? We've seen the firm stagnate in the past. 7. Intel ( INTC): +21.2%
A meaningful portion of Intel's year-over-year sales growth has come from the purchases of McAfee and Infineon's wireless business, but there is a good chunk of organic growth as well. Data center build out and emerging markets have been driving growth, and Intel is just now getting serious about taking on ARM in mobile devices. With a 3% yield to boot, the stock is probably worth a look. 6. Multiband ( MBND): +23.6% Multiband is a fulfillment contractor for DirecTV ( DTV). Two things have contributed to its solid growth. For one, DirecTV delivered good subscriber growth last year, especially in the second half on the back of its NFL promotion. Second, they purchased WPCS to fill out their engineering services profile. On the downside, DirecTV's gains are likely to slow going forward and interest obligations are fairly high here. 5. EMCOR Group ( EME): +24.0% While the acquisition of USM drove a lot of this, EMCOR still delivered over 7% organic growth. This construction contractor and maintenance supplier continues to suffer from the lingering weakness in commercial construction, but a continued recovery could aid what is already an improving business.
4. Spirit Airlines ( SAVE): +26.7% This small, low-priced airline has been growing rapidly, adding new routes and disclosing plans to triple their aircraft fleet by 2021. Be careful, though. The airline industry has been a notorious money loser for investors historically, and Spirit offsets their headline low fees with a plethora of "nickle-and-dime" add-on charges that make their value proposition tenuous at best. I have a feeling repeat business will not be easy to come by for this young company. 3. CF Industries ( CF): +38.8% Will the fertilizer business ever come back to earth? For over four years now, driven at first by ethanol subsidies and bolstered recently by historically low natural gas prices (a key input cost), nitrate fertilizer has become a phenomenally profitable business. CF's purchase a few years ago of Terra solidified their hold on the domestic market, and really cheap North American natural gas has even given them an edge to export. As long as nat gas stays cheap and corn prices high, this company is sitting pretty. 2. C&J Energy Services ( CJES): +156.5% That's no typo. This provider of fracking services came public last July and has fallen hard from the $29 IPO price to under $20 today, despite what can only be deemed outstanding results. This year the company will expand their fleet size from five to nine, the balance sheet has no debt and international expansion could be in the cards within the next five years. If you believe the government will enact a widespread ban on fracking, the price makes sense. In any other scenario, it doesn't. 1. Motorcar Parts of America ( MPAA): +162.6% Taking the cake is Motorcar Parts, an auto parts firm dealing in a variety of both reconditioned and new parts. The 2011 purchase of Fenco accounts for most of the revenue gain, but that deal has also set the balance sheet askew with $48 million in debt (vs. just $1.3 million in cash), almost tripled interest costs and will generate integration costs for the next year or so. Nevertheless, over the longer term the stock still appears undervalued and is worth a look.