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3 Stocks With Accelerating Growth

Few companies are growing their sales at the moment. Even fewer are growing them faster now than they have in recent periods. Nonetheless, a search for companies whose products and services are in suddenly fierce demand turned up a jam maker, a superhero specialist and a small-town nursing agency.

Standard & Poor’s says about 200 members of its 500-stock ticker index have reported second-quarter financial results, and that only a quarter of these increased their sales vs. a year ago. Accelerating sales growth is rarer still, since even successful companies tend to grow slower as they age. Sometimes they succeed so thoroughly that they saturate their potential customer base (for example, Microsoft (MSFT) in 2004, with a 96% share of the operating system market), and sometimes they struggle to protect their customer base from competitors (for example, Microsoft today, with an 88% share of the operating system market).

For the companies below, something is going unusually right. Either a new product has caught on with customers or a longstanding one has gained appeal due to outside events. Whatever the cause, stock ticker investors should favor companies with quickening growth, provided their share prices seem reasonable.

J.M. Smucker

For a 112 year-old concern, Smucker (SJM) looks lively. In its fiscal fourth quarter ended April 30 the company increased sales 9%, or 81% including the contribution from Folgers coffee, which it bought in November 2008. Adjusted profit for the quarter swelled 40% to $1.02 a share. Wall Street had expected just 63 cents a share. Packaged food sellers in general have done well of late, with Americans eating more meals at home to cut costs. Smuckers sells staples like Hungry Jack pancake mix, Pillsbury rolls, Crisco shortening and of course its namesake peanut butter and jam. Coffee seems an especially strong performer for Smuckers. During the four weeks ended June 19 industry coffee sales increased less than 1%, while sales of Smuckers’ coffees, including Folgers and Dunkin’ Donuts beans and grounds, rose 7%. The stock ticker seems fairly priced at 14 times earnings and it carries a dividend yield of 2.8%. One mildly negative sign: With shares up 17% this year, company insiders have been cashing in stock ticker options of late.

Marvel

This year was supposed to prove a difficult one for Marvel (MVL), since more than 30% of its sales come from economically sensitive consumer products based on its comic book heroes, and since none of the company’s sure-thing film franchises (Spiderman, X-Men) have releases scheduled. But Marvel’s first-quarter sales shot 75% higher on demand for “Iron Man” and “The Incredible Hulk” on DVD. Analysts still expect full-year earnings per share to shrink to $1.35 from $2.61 last year. That puts shares at a worrisome 29 times 2009 earnings. Wall Street’s early forecast — guess, really — is that 2010 earnings will rebound to $2.06. Even that figure puts today’s stock ticker price at 19 times earnings — pricey. Encouragingly, Marvel has topped analysts’ earnings forecast by an average of 36% over its past four quarters. But it will have to keep the upside surprises coming to justify the valuation.

LHC Group

Americans are growing fatter and living longer. Together, the two trends suggest steady growth in demand for everyday care for conditions like diabetes, high blood pressure and chronic pain. LHC Group (LHCG) dispatches aides to patients’ homes to help with housekeeping, bathing and meal preparation, and sends nurses to help with health care. The company also operates long-term care and rehabilitation centers. It targets rural markets, which tend to be underserved by other nursing agencies, and which skew older than cities. All is moving in the right direction for LHC at the moment except for its stock ticker price. Sales are forecast to increase 33% this year and earnings per share 30%. Debt is negligible. But shares have lost 31% year to date. An ongoing government review of the company’s Medicare business, expected to wrap up by the end of the third quarter, is likely making stock tickerholders nervous, although analysts believe the matter relates to documentation problems, not inappropriate levels of service. Also, health-care companies of all sorts have depressed valuations at the moment as Congress ponders a greater role for government in medicine, at the possible expense of business. Perhaps the fears are already priced into the stock ticker and then some. It goes for just 11 times earnings.

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