STOCK TO STUDY: T. Rowe Price Group, Inc ... - BetterInvesting

The following 18 companies all passed a screen using the new
MyStockProspector.com online tool, which employs Morn -
ingstar data. Small-company ideas are always in demand, so
we searched for high-growth companies with annual revenues
of under $1 billion.
To focus on appropriate annual growth rates, we
filtered for five-year sales and earnings rates of 15
percent and above. And to have some measure of
consistent growth, we asked for sales and earnings rates to
be higher than 15 percent for the trailing four quarters.
Stocks with price-earnings ratios above 35 were excluded.
Finally, to further decrease the number of candidates
and focus on the most interesting ones, we required im -
plied growth to be 15 percent and higher.
As defined by MyStockPros pector.com, implied growth
is the growth rate of retained earnings (that is, earnings
not paid out as dividends) and is calculated by mul ti -
plying the five-year average return on equity by
Small-Company Stocks | STOCKS
High Growth for All, But Not All of Equal Quality
Implied Growth Rate Aids in Screening Stocks
by Adam Ritt, Editor
18 High-Growth Small Companies With Revenue Under $1 Billion
(1 – the dividend payout). This figure provides an indi -
cation of future growth.
We’ve also included the stock’s institutional ownership.
Companies making the screen are mentioned only
for educational purposes; no investment recommendations
are intended. We hope you use this list as a starting
point for studies and make your own determinations of
each stock’s quality and return potential.
As you peruse the stocks, it’s likely you’ll find some of
lower quality relative to others. Notice, for example, that
three Chinese-based stocks (China Botanic, Changyou.com
and China Ceramics) have very low P/Es relative to their
growth rates. It’s possible that the market has assessed
these com panies as being of low quality for some reason
and investors don’t want to pay a high price for the high
growth. But again, your judgment might differ.
To receive a steady stream of new ideas, the free
BetterInvesting Weekly newsletter always includes a stock
screen. Go to www.BetterInvesting.org/Weekly to sign up.
Company Name
Symbol
Industry
Sales
($ millions)
5-yr sales
growth (%)
5-yr EPS
growth (%)
Last 4Q sales
growth (%)
Last 4Q EPS
growth (%)
Implied
growth (%)
Current
P/E
Institutional
ownership (%)
Allegiant Travel Co. ALGT Airlines 779.1
19.9
18.4
17.7
45.3
17.3
19.0
85.8
Bio-Reference Labs
BRLI
Diagnostics and research
661.7
22.2
28.2
18.4
16.3
17.7
19.8
93.5
Credit Acceptance
CACC
Credit services
525.2
21.1
46.1
16.9
18.4
26.9
12.9
37.1
China Botanic
Pharmaceutical
CBP
Biotechnology
72.7
26.2
23.4
20.6
16.4
31.9
0.7
0.7
China Ceramics
CCCL
Conglomerates
230.6
394.6
249.2
51.0
34.9
19.2
1.2
45.4
Changyou.com
CYOU
Electronic gaming, multimedia
484.6
71.1
115.2
48.6
75.5
50.7
4.4
5.6
Epoch Holding
EPHC
Asset management
92.4
32.7
37.1
35.3
21.4
17.5
23.5
52.9
Homeowners Choice
HCI
Insurance — property, casualty
94.8
70.9
23.6
98.3
100.0
19.1
8.8
58.2
Impax Laboratories
IPXL
Drug manufacturers
512.9
294.4
64.2
32.1
27.7
23.4
20.2
88.5
KapStone Paper and
Packaging
KS
Paper and paper products
906.1
33.9
40.2
41.5
100.0
17.8
8.7
76.2
Grand Canyon Education
LOPE
Education and training services
426.7
46.1
145.3
16.7
42.0
32.2
16.1
92.0
MTY Food Group
MTY.TO
Restaurants
78.5
29.2
16.9
25.0
27.4
18.5
20.7
16.0
Portfolio Recovery Assoc.
PRAA
Business services
458.9
19.9
18.3
26.0
24.4
16.2
15.1
97.5
Questcor Pharmaceuticals
QCOR
Biotechnology
218.2
37.0
20.0
100.0
100.0
40.8
9.9
91.2
Sturm, Ruger & Company
RGR
Aerospace and defense
328.8
20.0
53.0
47.9
70.5
18.5
15.2
96.0
Steven Madden
SHOO
Footware and accessories
987.3
22.0
37.5
39.0
18.7
17.7
17.4
93.5
Syntel
SYNT
Information tech services
642.4
16.7
17.1
15.2
65.4
27.3
13.0
35.7
Texas Pacific Land Trust
TPL
Real estate — general
34.3
17.7
24.4
28.1
36.3
44.8
22.0
42.0
Morningstar data as of Jan. 14, 2013
March 2013 | BetterInvesting | 35