Setting the Bar High

 | Apr 20, 2012 | 12:30 PM EDT
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In earnings season, one of the key metrics traders await is whether a company missed, met, or beat analysts' views. Of course, the actual earnings number often turns out to be less important than the outlook, in terms of how the stock is traded after the report. Even so, one of my screens is set for stocks of companies expected to see earnings growth of 25% in the coming report, and in the next fiscal year.

That's a high bar, but there are companies out there with such forecasts. Among the higher-profile growth names reporting soon are Alexion Pharmaceuticals (ALXN) and Questcor Pharmaceutical (QCOR). Both are set to report April 24 -- Alexion before the open, and Questcor after the close. Alexion is seen earning $0.39 a share, up 30% from a year earlier. Questcor is expected to bring in $0.52 per share in the quarter, which would be a gain of 160% from the year-earlier quarter.

But even some more stealthy stocks with good fundamental and technical track records are expected to show outstanding growth when they report next week.

Among these is InvenSense (INVN), a motion-processing chipmaker whose stock price may be bottoming out after falling from a March 26 high of $22.35. As of Thursday, shares were trading at around $15.45, slightly above their 200-day average. The company is expected to report its fiscal fourth quarter later this month, with analysts eyeing income of $0.07 a share, up 130% from $0.03 a share in the year-earlier quarter.

The small-cap name had been a favorite of many growth investors in the months following its November initial public offering. However, it's fallen hard in the past four weeks, and is nowhere remotely close to buyable -- though it's one that I see as having enough potential to keep it on my watch list.

Another small-cap for which analysts have great expectations is On Assignment (ASGN), a California-based staffing firm. The $665 million company is slated to report its first quarter after the bell April 25. Analysts have pegged earnings at $0.16 a share, which would be a year-over-year gain of 100%.

On Assignment only recently landed on my radar. It made a huge price move March 21, gapping 27% higher after the company said it had acquired Apex Systems, a privately held information-technology staffing company. The stock has been in a holding pattern since then, with a slight pullback in the past couple of weeks. However, it's remained within a fairly narrow range, and has not come anywhere near closing the gap from March 21.

The company's fundamental track record is excellent, with triple-digit earnings growth in five of the past six quarters, and quadruple-digit growth in the sixth. Revenue has been growing at double-digit rates since the third quarter of 2010. Analysts see income gains of 36% and 26% in the next two years.

Of course, anything that's perceived as disappointing in the earnings report can send the stock lower, so stock could always pull back further before it resumes its rally.


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