Rules of the Game: Burgeoning Sales

 | Dec 13, 2012 | 9:00 AM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:




Earlier this week, I wrote about a couple of stocks showing accelerating sales growth, a key metric for which I screen when I'm building portfolios.

Most of the time -- and this week is no exception -- these revenue scans yield a number of small- and mid-cap names that show the best growth rates. Larger, more mature companies typically grow more slowly. That's fine, and it doesn't mean I'll necessarily pass up a steady large-cap in favor of a smaller company in high-growth mode.

But when I'm looking for the elements that make up a diversified equity portfolio, I like to know where the growth potential lies. So in today's column, I'll drill down and look at some of the mid-caps showing the best rates of sales growth in recent quarters.

Online travel was in the news this week as Liberty Interactive (LINTA) acquired a majority stake in TripAdvisor (TRIP). Last month, Priceline (PCLN) said it would acquire fellow online travel firm Kayak (KYAK) for $40 per share in cash and stock.

One established name in the category is Expedia (EXPE). The stock has had a terrific 2012, with the price more than doubling this year. It closed Wednesday at $60.57, 5% above its 50-day average, and below its Nov. 29 high of $62.80.

Expedia goes ex-dividend Thursday. Typically stocks decline on the ex-div date, and roughly by the amount of the dividend. Expedia's dividend is $0.52 per share. Any temporary, dividend-related decline does not affect my longer-term outlook for the stock.

The company's growth has accelerated in the past three quarters, from $787.1 million to $1.2 billion most recently. In the current quarter, analysts expect a top line of $929.33 million, which would mark a gain of 18% over the prior year, as well as continue the trend of earnings-growth acceleration.

Because the stock had such a rapid rise in 2012, at this juncture it would be constructive for the shares to pull back to the 200-day moving average. The stock has not fallen beneath that line for more than a year, so a retreat to flush out some weak holders seems somewhat overdue.

Another mid-cap that registered on my revenue-growth scan was Web-content optimizer Akamai (AKAM). This is an interesting case, because the stock is making something of a technical comeback. Shares tumbled 32% in 2011, and only gains in November and December of last year rescued it from an even worse decline.

This year, Akamai has rebounded with a gain of 23%.

Year-over-year revenue has accelerated in the past four quarters, climbing from $281.9 million to $345.3 million. In the current quarter, analysts have pegged sales at $381.21 million, which would be an 18% year-over-year gain. 

The stock cleared a two-month consolidation Wednesday, closing at $39.97. Wednesday's trade also brought a 52-week session high of $40.61. Current levels are a bit frothy, but the stock could offer a new entry point on the next pullback to a short-term moving average.

The stock got 200-day-line support earlier this month, a good signal that institutional investors were regaining confidence in the stock, rather than bailing out.

Columnist Conversations

We will take off some more risk, bank some winners SOLD PG OCT 90 CALL AT 3.3 (in at 2.90) ...
After a very calm and sedate period of volatility which saw the VIX fall not only to all time lows but had a r...
today is a good day to lighten the load and take some positions off the table. SOLD WB OCT 85 CALL AT 11 (i...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.