Small cap growth stocks are considered shooting stars. Some will pay out big, but most will lose you money. The reason of course is that many of these stocks are obscenely overvalued.
But what if we screen for growth stocks that are also reasonably priced?
This is the screen that Peter Lynch would have loved.
Our screening criteria is as follows:
- 5 year EPS growth > 15%
- Next year EPS growth > 15%
- 5 year Operating Income growth > 15%
- 5 year Sales growth > 8%
- Earnings Yield > 5
- PEG ratio < 1.2, both forward and trailing
- Is a mid cap, meaning the market cap is between $30 m and $2 B
We are looking for stocks that are listed on the US exchanges.
Safe Bulkers is in a cyclical industry so make sure you do your research and understand the dry bulk shipping industry. I have an exposure to shipping industry so I will pass on this. I do not invest in banks. That leaves us with ISSC and ACLS.
Axcelis Technologies: ACLS serves the semiconductor industry and the revenue and earnings have been declining over the years. What stuck out to me was their significanl leves of cash on the books. I am definitely interested in digging deeper into this name.
Innovative Solutions: ISSC supplies integrated Flight Management Systems, Flat Panel Display Systems, Integrated Standby Units, Positioning System receivers that enable reduced carbon footprint navigation, and an Autothrottle, which allows a pilot to automatically control the power setting of the engine and is designed to reduce pilot workload and enhance safety. The fundamentals look attractive and I will review this stock as well.
Remember, a screen is not complete research. Deeper dive is required before you make any investment decision.
