The June issue of Money Magazine makes the argument that if the current recovery is going to last, companies need to start increasing sales rather than just earnings. I couldn't agree more. To find some, I did a stock screen looking for those companies whose most recent annual sales growth is higher than its earnings growth. These will truly shine in a robust economy.

IN PICTURES: World's Greatest Investors

Small Cap - Buffalo Wild Wings (Nasdaq:BWLD)
The restaurant operator known for its chicken wings has hit a speed bump in 2009. Its stock is down 9% after averaging roughly 20% in each of the last five years. Clearly, its stock price got out of hand. Yet I have to wonder if investors didn't overreact to its first-quarter report that delivered flat same-store sales, 16% revenue growth and a 23% increase in earnings per share. It was more likely the comment from CEO Sally Smith that it was going to have a tough time meeting its goal of increasing earnings by 20% in 2010. She didn't say it couldn't, but investors took that as gospel, dropping the stock 17% in one day of trading. It continued to drop throughout May. Its current valuation is more attractive than McDonald's (NYSE:MCD), Yum Brands (NYSE:YUM) and the other big players in the industry. I'd be looking to buy once the markets stabilize.

Mid Cap - J.M. Smucker (NYSE:SJM)
Smucker's announces fourth quarter results June 17. It should be another upside surprise. Analysts expect revenues for the year ended April 30 to be $4.58 billion, which would be a 21.9% increase year-over-year. In terms of earnings, the consensus of 11 analysts is $4.17 a share or a 10.6% increase. The Folgers acquisition continues to pay dividends. On May 18, the company announced it was raising coffee prices in the U.S. by 4% because of increased green coffee costs. A price increase usually signals management confidence in a brand. Analysts currently call for 4% revenue growth in 2011. That's pretty conservative especially after increasing it by 21% or so in 2010. The Smuckers story continues to get better and the $1.60 annual dividend makes a long-term hold easy to digest.

Large Cap - Lorillard (NYSE:LO)
In 2009, the cigarette maker increased revenues by 24% to $5.2 billion. However, it's an optical illusion. Most of the gain came in the form of higher federal excise taxes, which went up April 1, 2009. Without the taxes, revenues really only grew by 5.6% to $3.69 billion. I'm not a fan of cigarette companies, but it's hard to ignore their stable profits and attractive dividends. In 2009, LO's earnings per diluted share grew 11.8% to $5.76, paying out two-thirds as dividends. At current prices, Lorillard yields 5.2%. With $1.38 billion in cash and half that in debt, it's a great play if you don't have a problem with the nature of its business.

Bottom Line
All three of these stocks should do well in the coming months as the economy continues to improve, and all will generate attractive earnings from whatever sales growth they do achieve. That's all you can ask for. (To learn more, see Steady Growth Stocks Win The Race.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!


Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!