Growth Stocks
Although growth stock picks can be highly volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.
And keep in mind that we focus on growth stocks, which have a good long-term history and favourable prospects. We downplay momentum stocks that tend to attract many investors simply because they are moving faster than the market averages, but are liable to fall sharply when their momentum fades.
There’s room for growth stock investing in your portfolio, but make sure you follow our TSI Network three-part Successful Investor strategy for your overall portfolio:
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
Make better stock picks when you read this FREE Special Report, Canadian Growth Stocks: WestJet Stock, RioCan Stock and More.
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TEMPUR SEALY $47.05 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempursealy.com; Shares outstanding: 60.4 million; Market cap: $2.8 billion; No dividends paid) is the new name of Tempur-Pedic after its March 2013 purchase of rival Sealy Corp. for $1.3 billion.
< br /> In the quarter ended September 30, 2013, Tempur Sealy’s revenue rose 1.5%, to $390.1 million from $384.4 million a year earlier. Sealy’s contribution was the main reason for the rise. Excluding one-time items, earnings per share gained 4.3%, to $0.73 from $0.70. That beat the consensus estimate of $0.69.
< br /> The company’s long-term prospects are sound, and the Sealy purchase is a positive. However, the stock now trades at a somewhat high 20.9 times Tempur Sealy’s forecast 2013 earnings of $2.25 a share. In addition, while the Sealy acquisition should pay off, a major acquisition like this can always come with hidden problems.
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< br /> In the quarter ended September 30, 2013, Tempur Sealy’s revenue rose 1.5%, to $390.1 million from $384.4 million a year earlier. Sealy’s contribution was the main reason for the rise. Excluding one-time items, earnings per share gained 4.3%, to $0.73 from $0.70. That beat the consensus estimate of $0.69.
< br /> The company’s long-term prospects are sound, and the Sealy purchase is a positive. However, the stock now trades at a somewhat high 20.9 times Tempur Sealy’s forecast 2013 earnings of $2.25 a share. In addition, while the Sealy acquisition should pay off, a major acquisition like this can always come with hidden problems.
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BROADRIDGE FINANCIAL $37.09 (New York symbol BR; TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 119.0 million; Market cap: $4.4 billion; Dividend yield: 2.3%) earned $48.0 million, or $0.39 a share, in its fiscal 2014 first quarter, which ended September 30, 2013. That’s up 116.0% from $22.0 million, or $0.18 a share, a year earlier.
< br /> Revenue rose 11.0%, to $545.2 million from $495.8 million. Broadridge continues to do a good job of attracting new clients. It also held on to 99% of its existing customers.
< br /> Excluding unusual items, the company expects to earn $2.00 to $2.10 a share in fiscal 2014. The stock trades at a reasonable 18.1 times the midpoint of this range.
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< br /> Revenue rose 11.0%, to $545.2 million from $495.8 million. Broadridge continues to do a good job of attracting new clients. It also held on to 99% of its existing customers.
< br /> Excluding unusual items, the company expects to earn $2.00 to $2.10 a share in fiscal 2014. The stock trades at a reasonable 18.1 times the midpoint of this range.
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DOREL INDUSTRIES $36.46 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 31.5 million; Market cap: $1.2 billion; Dividend yield: 3.4%) makes a range of products, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational products, mainly bicycles.
< br /> In the three months ended September 30, 2013, Dorel’s sales fell 1.0%, to $607.3 million from $613.3 million a year earlier (all figures except share price and market cap in U.S. dollars). Slower sales in the juvenile products segment offset gains at the home furnishing division and the recreational and leisure business.
< br /> Excluding one-time items, earnings per share were unchanged at $0.64.
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< br /> In the three months ended September 30, 2013, Dorel’s sales fell 1.0%, to $607.3 million from $613.3 million a year earlier (all figures except share price and market cap in U.S. dollars). Slower sales in the juvenile products segment offset gains at the home furnishing division and the recreational and leisure business.
< br /> Excluding one-time items, earnings per share were unchanged at $0.64.
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FAIR ISAAC CORP. $57.71 (New York symbol FICO; TSINetwork Rating: Average) (415- 472-2211; www.fairisaac.com; Shares outstanding: 35.2 million; Market cap: $2.0 billion; Dividend yield: 0.1%) reports that its earnings per share before one-time items rose 16.7% in the three months ended September 30, 2013, to $0.98 from $0.84 a year ago.
< br /> Revenue gained 2.3%, to $190.3 million from $186.1 million. That’s largely due to acquisitions, which contributed $23 million to the company’s revenue in the latest quarter. Due to the uncertain economy, Fair Isaac has had trouble closing deals with several North American banks. It aims to complete these sales in the next few months.
< br /> The company continues to spend around 9% of its revenue on research. That lets it keep producing innovative products that help it stay ahead of the competition.
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< br /> Revenue gained 2.3%, to $190.3 million from $186.1 million. That’s largely due to acquisitions, which contributed $23 million to the company’s revenue in the latest quarter. Due to the uncertain economy, Fair Isaac has had trouble closing deals with several North American banks. It aims to complete these sales in the next few months.
< br /> The company continues to spend around 9% of its revenue on research. That lets it keep producing innovative products that help it stay ahead of the competition.
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< strong>DELPHI ENERGY $1.43 (Toronto symbol DEE; TSINetwork Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 153.1 million; Market cap: $217.4 million; No dividends paid) develops, produces and explores for oil and natural gas. About 74% of its production is gas. The remaining 26% is oil.
< br /> The company’s output rose 6.5% in the three months ended September 30, 2013, to 8,797 barrels of oil equivalent per day (including gas) from 8,257 barrels a year earlier.
< br /> Cash flow per share gained 16.7%, to $0.07 from $0.06. The higher production was the main reason for the increase. The company also realized higher prices for its oil and gas in the latest quarter.
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< br /> The company’s output rose 6.5% in the three months ended September 30, 2013, to 8,797 barrels of oil equivalent per day (including gas) from 8,257 barrels a year earlier.
< br /> Cash flow per share gained 16.7%, to $0.07 from $0.06. The higher production was the main reason for the increase. The company also realized higher prices for its oil and gas in the latest quarter.
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BIRCHCLIFF ENERGY $7.27 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 142.8 million; Market cap: $1.1 billion; No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 81% of its output is gas. The remaining 19% is oil.
< br /> In the three months ended September 30, 2013, Birchcliff’s production rose 15.1%, to 24,662 barrels of oil equivalent per day (including gas) from 21,426 barrels a year earlier. Cash flow per share gained 50.0%, to $0.30 from $0.20, on the increased production and higher oil and gas prices.
< br /> Last year, Birchcliff completed Phase III of its gas plant expansion in Pouce Coupe, Alberta. This project doubled the facility’s capacity and is helping the company bring the additional gas it is producing to market.
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< br /> In the three months ended September 30, 2013, Birchcliff’s production rose 15.1%, to 24,662 barrels of oil equivalent per day (including gas) from 21,426 barrels a year earlier. Cash flow per share gained 50.0%, to $0.30 from $0.20, on the increased production and higher oil and gas prices.
< br /> Last year, Birchcliff completed Phase III of its gas plant expansion in Pouce Coupe, Alberta. This project doubled the facility’s capacity and is helping the company bring the additional gas it is producing to market.
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ACI WORLDWIDE $62.74 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402- 334-5101; www.tsainc.com; Shares outstanding: 39.5 million; Market cap: $2.4 billion; No dividends paid) makes software that processes transactions involving credit cards, debit cards, ATMs, point-of-sale terminals and interbank payments. Its products also help cut fraud.
< br /> In the quarter ended September 30, 2013, acquisitions increased ACI’s revenue by 38.0%, to $213.9 million from $155.1 million a year earlier. Earnings per share rose 79.3%, to $0.52 from $0.29. Cost cuts and the higher revenue were behind the rise.
< br /> The company’s outlook is positive, but the stock trades at a high 22.4 times ACI’s forecast 2014 earnings of $2.80 a share. Moreover, any problems with integrating its recent acquisitions could significantly cut into 2014 earnings.
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< br /> In the quarter ended September 30, 2013, acquisitions increased ACI’s revenue by 38.0%, to $213.9 million from $155.1 million a year earlier. Earnings per share rose 79.3%, to $0.52 from $0.29. Cost cuts and the higher revenue were behind the rise.
< br /> The company’s outlook is positive, but the stock trades at a high 22.4 times ACI’s forecast 2014 earnings of $2.80 a share. Moreover, any problems with integrating its recent acquisitions could significantly cut into 2014 earnings.
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< strong>RUBY TUESDAY, INC. $6.58 (New York symbol RT; TSINetwork Rating: Speculative) (865-379-5700; www.rubytuesday.com; Shares outstanding: 61.4 million; Market cap: $405.1 million; No dividends paid) owns 703 casual dining restaurants in the U.S. Franchisees operate 33 outlets in the U.S. and 42 overseas.
< br /> In the three months ended September 3, 2013, Ruby Tuesday’s sales fell 11.7%, to $289.7 million from $327.9 million a year earlier. Continued weak consumer spending was the main reason for the decline. As well, the company closed less profitable restaurants in the quarter, and competition remains intense in the casual-dining business.
< br /> Ruby Tuesday lost $21.9 million, or $0.36 a share, compared to a year-earlier profit of $3.1 million, or $0.22 a share. That widely missed the consensus estimate of a $0.05-a-share loss, although the latest quarter included a $7.5-million pre-tax charge for closing underperforming locations.
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< br /> In the three months ended September 3, 2013, Ruby Tuesday’s sales fell 11.7%, to $289.7 million from $327.9 million a year earlier. Continued weak consumer spending was the main reason for the decline. As well, the company closed less profitable restaurants in the quarter, and competition remains intense in the casual-dining business.
< br /> Ruby Tuesday lost $21.9 million, or $0.36 a share, compared to a year-earlier profit of $3.1 million, or $0.22 a share. That widely missed the consensus estimate of a $0.05-a-share loss, although the latest quarter included a $7.5-million pre-tax charge for closing underperforming locations.
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CHIPOTLE MEXICAN GRILL $531.66 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 30.9 million; Market cap: $16.7 billion; No dividends paid) is a Denver- based Mexican restaurant chain. It charges slightly higher prices than fast food companies, but it offers better quality food, including naturally raised meat, and superior decor and service.
< br /> In the three months ended September 30, 2013, Chipotle’s sales gained 18.0%, to $826.9 million from $700.5 million a year earlier. The company’s restaurants attracted more customers during the quarter, which pushed up same-restaurant sales by 4.3%. Chipotle also opened 37 new outlets, and now has a total of 1,539. In 2014, it aims to open 180 to 195 more.
< br /> Earnings rose 15.3%, to $83.4 million from $72.3 million. Per-share earnings increased 18.4%, to $2.70 from $2.28, on fewer shares outstanding.
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< br /> In the three months ended September 30, 2013, Chipotle’s sales gained 18.0%, to $826.9 million from $700.5 million a year earlier. The company’s restaurants attracted more customers during the quarter, which pushed up same-restaurant sales by 4.3%. Chipotle also opened 37 new outlets, and now has a total of 1,539. In 2014, it aims to open 180 to 195 more.
< br /> Earnings rose 15.3%, to $83.4 million from $72.3 million. Per-share earnings increased 18.4%, to $2.70 from $2.28, on fewer shares outstanding.
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HECLA MINING $2.98 (New York symbol HL; TSINetwork Rating: Extra Risk) (208-769- 4100; www.hecla-mining.com; Shares outstanding: 342.6 million; Market cap: $1.0 billion) explores for, mines and processes silver and gold in the U.S. and Mexico.
< br /> Most of the company’s silver output comes from its Greens Creek mine in Alaska and its Lucky Friday project in Idaho. Its gold production mainly comes from its newly acquired Casa Berardi mine in Quebec.
< br /> All of Hecla’s mines have potential for higher production, including Casa Berardi, where the company is deepening the mine shaft to boost output and extend the project’s life. However, Hecla is cutting back on capital spending while it waits for higher gold and silver prices.
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< br /> Most of the company’s silver output comes from its Greens Creek mine in Alaska and its Lucky Friday project in Idaho. Its gold production mainly comes from its newly acquired Casa Berardi mine in Quebec.
< br /> All of Hecla’s mines have potential for higher production, including Casa Berardi, where the company is deepening the mine shaft to boost output and extend the project’s life. However, Hecla is cutting back on capital spending while it waits for higher gold and silver prices.
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