7 appetizing growth stocks
This post comes from Matt Koppenheffer at partner site The Motley Fool.
If I asked you to cook up your ideal company, what would it look like?
I’m not asking for your favorite Fortune 500 company or an up-and-coming small-cap. I want you to think about the components you’d give to a company you could concoct right from scratch.
Would it be in a particular industry? Would it provide services, or would it make products? Would it have fat profit margins or make money instead by doing a huge volume?
We could spend all day going over the details of this magnifique dish, but I’d guess there’s one ingredient we’d all liberally add to our creations: growth. All other additives are great, but how interesting can a business be if it’s stagnating without avenues for expansion?
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I’ve dug up a sample of real-world companies expected to post significant growth in the years ahead. To see which might be the best bets, I’ve consulted with MSN CAPS, the investment community organized to help individuals beat the market. CAPS incorporates the knowledge, information and skills of more than 135,000 investors.
Here are our candidates:
Visa (V) operates the world’s biggest consumer payment system, with about1.6 billion credit and other payment cards in circulation. The Foster City, Calif., company has a long-term expected growth rate of 19%, according to financial information provider Data IQ, and per-share earnings of $1.79. The stock trades at a forward price-to-earnings ratio of 20.2. At CAPS, the stock has a three-star rating.
VeriFone Holdings (PAY) produces e-commerce software and equipment to process electronic payments, such as smart-card readers, point-of-sale terminals and receipt printers. The San Jose, Calif., company has a long-term expected growth rate of 18%, according to Data IQ, and a per-share loss of $6.37. The stock trades at a forward price-to-earnings ratio of 18.6 and carries a three-star rating at CAPS.
Assured Guaranty (AGO) is a holding company that provides insurance and reinsurance, as well as mortgage guarantee coverage, through its subsidiaries. The company, incorporated in Bermuda, has a long-term expected growth rate of 16%, according to Data IQ, and a per-share loss of $4.25. The stock trades at a forward price-to-earnings ratio of 6.6 and has a one-star rating at CAPS.
Agilent Technologies (A) makes scientific instruments, which it sells to 30,000 customers worldwide. The Santa Clara, Calif., company has a long-term expected growth rate of 12%, according to Data IQ, and per-share earnings of 48 cents. The stock trades at a forward price-to-earnings ratio of 19.4 and has a three-star rating at CAPS.
Schering-Plough (SGP) makes prescription and over-the-counter drugs and other health care products. The New Jersey company has a long-term expected growth rate of 11%, according to Data IQ, and per-share earnings of $1.49. The stock trades at a forward price-to-earnings ratio of 14.5 and boasts a four-star CAPS rating.
Murphy Oil (MUR) explores for oil and natural gas worldwide and has refining and marketing operations in the U.S. The company, incorporated in Delaware and run out of El Dorado, Ark., has a long-term expected growth rate of 11%, according to Data IQ, and per-share earnings of $5.42. The stock trades at a forward price-to-earnings ratio of 11.6 and has a five-star rating at CAPS.
Colgate-Palmolive (CL) makes toothpaste and an array of other personal-care products. The New York company has a long-term expected growth rate of 10%, according to Data IQ, and per-share earnings of $3.91. The stock trades at a forward price-to-earnings ratio of 15.5 and has a four-star CAPS rating.
Stock-market equivalent of junk food?
While these aren’t meant to be formal recommendations, they could be a great place to kick off your research. To get you started, I’ll dig down on Murphy Oil, the group’s sole five-star stock.
After gazing at the company’s latest results, you might wonder where the growth is coming from. Net income slid 74% in its fiscal second quarter and revenue fell 45% on declining energy prices as demand from homes and factories ebbed due to the recession.
But investors focus on future earnings, and here Murphy looks attractive. It has upstream and downstream operations, and its exploration footprint is global. Even as oil and natural gas prices declined, Murphy continued to explore and raised its production, putting itself in position to benefit when energy demand and prices rebound.
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Murphy has gained a positive following on CAPS, where 439 or the 451 investors who have rated the stock sing its praises. But why are CAPS participants so hot on this company? CAPS All-Star “stan8311” recently had this to say:
“Low P/E, manageable debt, good dividend growth, strong track record. I’m over-allocated toward oil & gas, but prices will be heading back up at some point, and Murphy seems very well positioned in the meantime.”
Tell us what you think: Is Murphy Oil a wholesome addition to a portfolio? The stock-market equivalent of junk food? Head over to CAPS and let your voice be heard. It can make a difference.
Matt Koppenheffer did not own or control shares of any company mentioned in this article.
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