CHICAGO, June 22, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Las Vegas Sands Corp. (NYSE: LVS), Coinstar, Inc. (Nasdaq: CSTR), Gildan Activewear Inc. (NYSE: GIL) and Bio-Reference Laboratories, Inc. (Nasdaq: BRLI).
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4 Companies Growing Their Top Lines
Despite recent softness in economic data, corporate profits are still expected to reach record highs over the next two years.
Although revenue growth has been a contributing factor, perhaps the biggest reason for the surge in profits over the last two years has been the expansion of net profit margins. Many companies got lean and mean during the Great Recession just to survive, and now that things have begun to turn around, corporations are rolling in the dough.
Don't expect margin improvement to continue at the same pace going forward, however. Net profit margins are near record-highs, and there is evidence that margin expansion may be slowing.
The Pricing Conundrum
With inflation starting to inch up in areas other than just food and energy, many companies are faced with the conundrum of either trying to pass along higher prices to cash-strapped consumers or eating the costs and squeezing their margins.
For companies with strong top-line growth, however, this shouldn't be as much of a problem. If a company's goods and services are in high demand, price increases are much easier to pass along.
4 Stocks to Consider
Listed below are 4 reasonably-priced stocks with strong revenue growth.
Las Vegas Sands Corp. (NYSE: LVS)
5-year Historical Sales Growth: 29.5%
First quarter sales growth y-o-y: 58.2%
Although the company's top-line has been struggling in Las Vegas, revenue growth has been explosive in Macau. Throw in the recently opened Marina Bay Sands in Singapore, and Asia now accounts for over 80% of the company's total revenue.
In the first quarter of 2011, revenues in Macau were up 21.6% year-over-year.
Shares trade at 22.6x forward earnings, a slight premium to the industry average of 20.7x. But with a 5-year projected EPS growth rate of 46%, its PEG ratio is an attractive 0.5.
Coinstar, Inc. (Nasdaq: CSTR)
5-year Historical Sales Growth: 31.4%
First quarter sales growth y-o-y: 31.2%
Another company with perhaps a misleading name. We've all seen the company's green coin counting machines at the supermarket, but Coinstar is actually best known for its ubiquitous "redbox" kiosks, which now account for more than 85% of the company's total revenue.
In the first quarter of 2011, total revenue was up 31% as redbox revenue soared 38%. Same-store sales for the redbox division grew an impressive 15.3%.
Despite bullish growth projections, shares trade at just 15.9x forward earnings and sport a PEG ratio of 0.9.
Gildan Activewear Inc. (NYSE: GIL)
5-year Historical Sales Growth: 14.9%
Second quarter sales growth y-o-y: 17.3%
Gildan sells undecorated "blank" T-shirts, fleece and sport shirts mostly under the Gildan® brand to wholesale distributors, which are then sold to screenprinters and embroiderers who decorate the apparel with designs and logos and sell it to the end-users. The company also recently moved into the sock business with the acquisition of Gold Toe Moretz.
Since 2002, Gildan has posted double-digit revenue growth every year, except for 2009. Sales for the second quarter of 2011 were up 17.3%.
Despite soaring input costs, Gildan actually expanded its gross margin in the second quarter by 30 basis points. This is because Gildan was able to successfully pass along the rising costs through higher average net selling prices, while still experiencing an increase in volume. That is a sign of strong demand for the company's products.
Despite 8 consecutive positive earnings surprises and bullish EPS projections, valuation looks attractive. Shares trade at 16.0x forward earnings and sport a PEG ratio of 1.0.
Bio-Reference Laboratories, Inc. (Nasdaq: BRLI)
5-year Historical Sales Growth: 23.3%
Second quarter sales growth y-o-y: 24.6%
Bio-Reference Laboratories is primarily a clinical testing lab serving physician offices with concentrations in esoteric testing, molecular diagnostics, anatomical pathology and correctional health care. The company has delivered double-digit revenue growth every year for the last decade.
Revenue in the second quarter of 2011 soared nearly 25% driven by a 23% surge in patient counts. Much of this can be attributed to a 27% increase in the company's sales force which allowed BRLI to expand or increase its presence in at least 16 states. The company expects this trend to continue.
The valuation picture looks very reasonable with shares trading at 18.1x forward earnings, a discount to the industry average of 19.7x. Its PEG ratio is 1.0.
Conclusion
Don't expect margin improvement to continue at the same pace going forward. If companies want to increase profitability over the long-term, they'll need to grow sales as well. These 4 companies are doing just that.
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