Don't Miss These 3 Companies With High Earnings-Per-Share Forecasts
Madhukar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Earnings per share, or EPS, is an important metric for investors performs a lot of functions: It helps suggest potential profits on individual shares in a company. Moreover, it also shows the performance of a company in a given timeframe, and annual EPS growth suggests the cash generation capacity of a company.
Here are three companies with annual EPS growth forecast above 25% for five years – but they'll only perform at their forecasted levels if their fundamentals are ultimately sound.
Increasing segmental growth
In the first quarter of 2013, LinkedIn’s revenue surged to $324.7 million, a growth of 72% year-over-year. The company expects revenue of around $1.44 billion by the end of this year, which was $972.3 million in the previous year. Revenue from its recruiting segment increased by 80%, to $184 million in the first quarter of 2013, and there is an increasing trend of job postings on LinkedIn by corporations.
In the previous year, 1.73 million jobs were posted on LinkedIn, but it is estimated that 2.6 million jobs will be posted in the current year. Looking at the growth opportunity in the recruiting segment, and the current growth in job postings, the company appears to be on track to reach its revenue target for the current year.
There are more than 225 million registered users of LinkedIn. Total revenue from premium account holders rose to $65.6 million in the first quarter of 2013, up by 73%, year-over-year. Subscription plans for the premium account range from $9.95 to $99.95 per month. To increase premium subscriptions, LinkedIn also added various features for its users like "Who’s viewed your profile", "Rich media", and a few others. LinkedIn’s projected growth is around 60% for this segment. Also, premium subscription penetration was around 0.45% in the previous year and is expected to grow to 0.56% this year. This will help the company to achieve its projected revenue growth for the current year.
New drugs pipeline
BioMarin develops, manufactures, and commercializes drugs for rare diseases. The company’s new product pipeline is impressive, as its new drug "Vimzim" recently showed a positive result in Phase 3 trials. Vimzim is used in the treatment of patients suffering from Morquio's syndrome, a rare, inherited metabolic disease that causes abnormal development of bones, a large head, short trunk, or widely spaced teeth. The company applied for its Biologics License Application to the FDA in March 2013, and the European Committee for Medicinal Products for Human Use is also expected to give it a stamp of approval before the first quarter of next year. Vimzim is expected to launch by April 2014. Once it gets approval, revenue from Vimzim will likely be around $600 million annually.
BioMarin’s PARP inhibitor program showed positive signs in the treatment of patients suffering from breast cancer and ovarian cancer. The clinical name of this drug is BMN-673, and data from Phase 1 and Phase 2 trials show a response rate of 44% (response rates refer to successful patient treatments.) BioMarin is now planning for a Phase 3 test of this drug, with a projected completion date of 2015. The company will test this drug on 3,000 patients in the U.S., and will file for FDA approval in 2016. The expected revenue from this drug will be around $600 million annually once it hits the market.
Future looks brighter
ArcelorMittal's revenue fell to $19.75 billion in the first quarter of 2013, a 13% year-over-year decline. However, it is expecting that the current year's global consumption of steel will exceed last year by 3%. The uptick in consumption this year will largely be driven by increased demand in Brazil, where it will grow by 3%-4%, and China, where it will grow 3.5%-4.5%, year-over-year. Steel industry earnings have been depressed due to the slowdown in the European economy, and the lower growth rate in the Chinese economy in the previous year. However, demand for steel is expected to increase in China, as a result of that country's substantive infrastructural development. ArcelorMittal targeted an EBITDA for the current fiscal year of $7.1 billion.
ArcelorMittal is expanding its business units in different regions of the world. Recently, it announced expansion of its steel production capacity in Brazil for around $165 million, which had been previously abandoned. Moreover, ArcelorMittal will invest in mining operations in Port Buchanan, Liberia, to enhance production capacity of iron ore by 15 million tons per year by 2015. The company estimates the increase in iron ore output will increase to 84 million tons in 2015, from 56 million tons in 2012. This increase in production capacity will help the company to foster growth in iron ore shipments.
In the current year, ArcelorMittal is also expecting a 2% increase in steel shipments and a 20% increase in iron ore shipments, year-over-year. In the first quarter of 2013, the average price of iron-ore remained at $135 per ton, which was above the expectation of $130 per ton, providing a solid upside for future growth.
LinkedIn will benefit from its recruitment segment and the trending increase in premium account users will give upside to the company's revenue in the current fiscal year. BioMarin's new product pipeline is impressive, as its trial tests show positive output. Approvals from drug authorities will enhance the company's revenue in upcoming years. Although ArcelorMittal's revenue declined in the first quarter of 2013, its outlook is positive for the rest of the year. The increasing demand for steel and iron ore will give upside to the company's revenue.
All three stocks are a "buy."
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Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends BioMarin Pharmaceutical and LinkedIn. The Motley Fool owns shares of ArcelorMittal and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!