Several of my stock screens incorporate revenue-driven earnings growth as a key method of identifying leadership. I don't want to see earnings driven by cost cuts; instead, I watch for double-digit, or at least increasing, revenue gains.
On many of my small- and mid-cap screens, it's not particularly tough to find companies where revenue is spurring income increases. Unlike their larger brethren, which have more room to slash expenses in the interest of growing the bottom line, smaller companies are often forced to show profit increases the old-fashioned way – by selling more.
In addition, I've noticed that most of the small- and mid-cap names showing up on my revenue and earnings screens lately tend to be U.S.-based. Many small domestic companies have little or no exposure to Europe, which larger firms have been citing as a drag on quarterly results.
Also helping results: Many of these smaller domestic companies that are showing up on my scans recently had their initial public offerings. By recent, I mean stocks that made their NYSE or Nasdaq debut within the past 15 years or so. Forget overhyped losers -- at least thus far -- such as Facebook (FB) or Zynga (ZNGA). The real leaders often include unheralded companies from less-than-glamorous sectors or industries.
One stock that meets that description is Thermon (THR), which went public in May 2011. The company makes thermal equipment for industrial uses. It says it specializes in "heat tracing" or applying steam, electric or liquid heat to tanks, pipes and other gear. In other words, it's not exactly the kind of company that attracts attention like, say, a social media firm.
Year to date, Thermon's stock price has risen nearly 22%. The company is due to report results for 2013's fiscal third quarter Aug. 7. Analysts see income of $0.21 a share on revenue of $69.27 million. Those would be gains over the year-ago quarter.
Unlike many small companies, Thermon does have a sizeable presence in overseas markets.
On its chart, Thermon stock is getting support above its short- and medium-term moving averages. The character of trade became more volatile in May, and has sported some fairly large intraweek price swings since then. The stock's five-day moving average crossed above the 15-day line Friday. That's a bullish sign, but keep in mind that earnings are due in about a week, and that news could send the stock sharply in one direction or another.
Another under-the-radar, small, recent IPO with some potential is Hibbett Sports (HIBB), a retailer with more than 800 stores in 26 states. This company went public in 1996, so it's still new enough to be in the window of time during which it can show youthful gains.
Hibbett, which has market capitalizaiton of $1.5 billion, has confirmed it will report its second quarter Aug. 17. Analysts expect income of $0.27 a share on sales of $169.30 million, gains over the year-ago quarter.
The company beat earnings views in each of the past four quarters. Recent earnings growth has been driven by double-digit revenue gains.
The stock rallied to an all-time high of $62.64 Friday, but then promptly retreated. It marked the first time for clearing resistance above $62, but it remains to be seen whether the stock can regain that mark prior to earnings.
After clearing a consolidation in October, Hibbett ran higher until May, getting solid support along its 10-week moving average. The current consolidation is only its second since it retreated to an intermediate low of $31.03 Oct. 4. That second phase of basing is often quite constructive, as a growing number of institutional investors know the stock, but not so many that the supply of fresh money has been exhausted.
At this point, the stock is in a buy zone, but be aware of that propensity to get beaten down when shares try to cross that $63 threshold.