If nothing caught your eye in last week’s screen of the Cathy Wood’s ARKK ETF, Going for Growth, perhaps something in this week’s screen will. Small-cap growth has been in contention for the best performing factor this year based on our analysis of factor performance. The table below compares relative performance to the S&P 500 over time for various exposures.
While mid-cap growth hasn’t provided much outperformance YTD, one might expect it to begin closing the gap sooner rather than later. Thus, we screen for small and mid-cap growth stocks this week with an eye towards proven consistency of growth.
We considered the following factors when screening:
- Traded on the NYSE or NASDAQ
- Market Cap Between $500M-$10B
- Price/Book Value Ratio > 2.5
- 3-5y EPS Growth Mean Estimate (Annualized) > 12%
- Sales 5y Trendline Growth Rate > 8.5%
- Sales Growth 5y R-Squared > 0.9
- EPS 5y Trendline Growth Rate > 12.5%
- EPS Growth 5y R-Squared > 0.9
The Sales and EPS growth criteria help us find companies that have grown at higher-than-average rates, and the R-Squared criteria compliments it. Measuring the R-Squared of the growth helps us exclude companies with high annualized growth rates due to one-off situations rather than consistency. A high R-Squared indicates companies with more reliable earnings or revenue growth.
CRA Intl., Inc. (CRAI)
Ensign Group, Inc. (ENSG)
Fox Factory Holding Corp. (FOXF)
Perficient, Inc. (PRFT)
Saia, Inc. (SAIA)
Five for Friday
Five for Friday uses stock screens to produce five stocks that we expect will outperform if a particular investment theme plays out in the future. Investment themes may be relevant to the current or expected market, industry and/or economic trends. Investment themes may not always represent our current forecast.
This report is not a recommendation to buy or sell the named securities. We intend to elicit ideas about stocks meeting specific criteria and investment themes. Please read our disclosures carefully and do your own research before investing.
Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research.
Follow Michael on Twitter or go to 720global.com for more research and analysis.
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