Part Six: Seven Growth Stocks Chosen to Let You Sleep at Night
For investors who want in on the growth game but prefer less melodrama in their portfolios, YCharts suggests creating another genre: sane growth. In our estimation, a sane growth portfolio would be packed with companies that manage decent sales gains but maintain a few safety valves typically missing in popular growth stocks: like reasonable share price valuations and earnings commensurate with revenues. In fact, right now looks like an especially good time to invest in sanity over popularity.
Go to YCharts for Part One of growth stocks, which explains the list in more detail.
With the mission of reducing risk, YCharts looked around for growing companies with sane data. We set the YCharts Stock Screener to find companies that reported sales growth of at least 10% over the past 12 months and at least that rate of retained earnings growth. We insisted on an historic price to sales ratio of less than 1.5. To weed out companies with weak balance sheets, we looked only at companies that received at 7 or higher from YCharts Pro for fundamentals. As an added safety, we considered only companies with market caps of at least $2.5 billion.
Airgas is a $6 billion market cap company that’s found a lucrative niche selling industrial gases, like containers of CO2 for soda, or oxygen for hospital patients. And while its revenue gains are nice – about 13% in the past 12 months and roughly 8% annually expected for the next couple of years – it’s really the profit line on this chart that gets the growth investors excited.
The company has a long history of continuous earnings growth, and analysts see little ahead to break the trend. It’s the largest player in the U.S. business, although it has serious competition from Praxair (PX) and Air Products and Chemicals (APD). A lot of companies in this industry are very small, and Airgas occasionally buys one. Air Products tried unsuccessfully to take over Airgas in 2010. Airgas’ share price has nearly doubled since that pre-takeover play era, as seen in this stock chart.
On an historic basis, Airgas’ current share price -- based on its PE ratio -- is neither particularly expensive nor cheap.