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. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  2. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  3. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  4. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  5. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  6. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  7. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  8. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  9. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  10. Investing News

    Corporate Bonds or Stocks: Which is Better Now?

    With market volatility high, you may think it is time to run for corporate bonds instead of stocks. Before you do take a deeper look into which is better.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

You May Also Like

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!