{"id":7187,"date":"2023-10-30T17:48:14","date_gmt":"2023-10-30T17:48:14","guid":{"rendered":"https:\/\/infundpros.com\/investment\/markel-and-pulte-can-flaunt-rapid-revenue-growth\/"},"modified":"2023-10-30T17:48:15","modified_gmt":"2023-10-30T17:48:15","slug":"markel-and-pulte-can-flaunt-rapid-revenue-growth","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=7187","title":{"rendered":"Markel And Pulte Can Flaunt Rapid Revenue Growth"},"content":{"rendered":"
\n

For a while, revenue growth at all costs was a popular approach, and investors fell for it.<\/p>\n

Now that stocks such as AMC Entertainment
\n AMC
\n <\/fbs-ticker> Holdings and WeWork (WE) have crashed too earth, investors are a little less in love with revenue growth. So, now that the fad has faded, let\u2019s revisit the area, with a trio of safeguards.<\/p>\n

Safeguard number one: We don\u2019t want companies that are giving away their product or service for less than it costs to produce \u2013 no matter whether the product is movie tickets or office space. That\u2019s madness.<\/p>\n

<\/fbs-ad><\/p>\n

Safeguard number two: We don\u2019t want companies that borrow to the hilt to fund rapid growth. That\u2019s foolhardiness.<\/p>\n

Safeguard number three: We don\u2019t want companies whose stocks sell for sky-high prices, perhaps because they are being flogged on Internet bulletin boards. That\u2019s stupidity.<\/p>\n

Here are five companies that have grown their revenue by 15% of more in the latest year and the latest five years, and in my judgment don\u2019t crash into the guardrails I described above.<\/p>\n

Markel
\n MKL
\n <\/fbs-ticker><\/h2>\n

Markel Group is a specialty insurer, offering lines such as professional liability, marine insurance, reinsurance and workers\u2019 compensation. During the past five years, it has grown its revenue at a 16.7% annual clip.<\/p>\n

Unusually for an insurer, it invests much of the revenue generated by its insurance operations into non-insurance ventures such as payroll processing, commercial real estate and private equity.<\/p>\n

Pulte<\/h2>\n

Pulte Group (PHM), based in Atlanta, is one of the largest U.S. home builders, selling at a variety of price points. Its average selling price is about $540,000. Its five-year revenue growth rate is 18.1%.<\/p>\n

You may think I\u2019m crazy to recommend a homebuilder at a time when rising mortgage rates have scared many buyers out of the housing market. Perhaps I am, but I think the pent-up demand for single-family houses will outweigh the mortgage problem in the next two or three years.<\/p>\n

Eagle Materials
\n EXP
\n <\/fbs-ticker><\/h2>\n

Cement, slag, aggregates and concrete are not the stuff that dreams are made of. But they have propelled Eagle Materials Inc. to a 15.9% revenue growth rate over the past five years.<\/p>\n

Recent results have been helped by the federal infrastructure bill, passed in November 2021. But Eagle\u2019s stock price hasn\u2019t moved much since that bill was passed. The stock sells for only 11 times earnings, a modest multiple. The company\u2019s net profit margin is handsome, 22%.<\/p>\n

Permian Resources<\/h2>\n

Boasting an 18.7% revenue growth rate the past five years is Permian Resources Corp. (PR) of Midland, Texas. Was formed through the merger of three small oil companies. Colgate Energy and Centennial Resources merged in 2022 to form Permian, which is now in the process of acquiring Earthstone Energy.<\/p>\n

The company has a market value of a little over $5 billion, which makes it a mid-capitalization stock, yet a comparative minnow in the world of big oil. Profitability has been spotty, so this one is speculative, but the stock is cheap at under 10 times earnings.<\/p>\n

Dorian LPG<\/h2>\n

Dorian LPG Ltd. (LPG), based in Stamford, Connecticut, owns and operates about 22 ships designed to carry liquefied petroleum gas, which the U.S. is exporting in increasing amounts to Europe. Its five-year revenue growth rate is 27.6%. I like the stock because I think the outlook for gas exports is strong.<\/p>\n

Dorian went public in 2014 and has reported a profit in seven of its 10 fiscal years. The latest fiscal year is the only one in which I would say its profitability was excellent, with a 19% return on stockholders\u2019 equity. The stock sells for six times recent earnings and five times forward estimates.<\/p>\n

The Record<\/h2>\n

The last time I wrote about stocks with rapid revenue growth, the results were spectacular\u2014a gain of 81% from July 20, 2020 to July 16, 2021. All four stocks I recommended rose, with MYR Group
\n MYRG
\n <\/fbs-ticker> leading the pack with a 172% gain.<\/p>\n

Align Technology
\n ALGN
\n <\/fbs-ticker>chipped in a 97% gain, and LGI Homes
\n LGIH
\n <\/fbs-ticker> returned 40%. Progressive
\n PGR
\n <\/fbs-ticker> brought up the read with 15%. Three of the four stocks beat the Standard & Poor\u2019s 500 Total Return Index, which was up 33% for the period.<\/p>\n

But alas, that time wasn\u2019t typical. In six outings, my rapid revenue growth stocks have returned an average of 14.5%, just a shade better than the index, which came in at 14.0% for the same six one-year periods.<\/p>\n

Three of the six columns showed a profit, and only two beat the S&P.<\/p>\n

Bear in mind that my column results are hypothetical and shouldn\u2019t be confused with results I obtain for clients. Also, past performance doesn\u2019t predict the future.<\/p>\n

Disclosure: My firm has a professional liability policy with Markel. A few of my firm\u2019s clients own Pulte<\/em>.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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